A subsidiary of Japanese real estate giant Mitsubishi Estate Co. Ltd. and two other companies have signed an agreement to build two huge new office towers at Citicorp Plaza, one of downtown Los Angeles' most successful commercial complexes.
Mitsubishi's involvement in the project will raise the number of downtown buildings owned partially or entirely by Japanese companies to at least 12. Two other projects slated to break ground within the next year will also involve Japanese firms.
The two new towers will add about 1.8 million square feet of office space to downtown's fast-growing skyline and will nearly triple the current square footage of Citicorp Plaza, a 2-year-old office and retail complex on Figueroa Street between 7th and 8th streets.
Mitsubishi, Japan's largest real estate company, will build the new towers in a joint-venture partnership with Prudential Insurance Co. of America--the largest real estate concern in the U.S.--and Houston-based developer Ayrshire Corp. The partnership will be known as South Figueroa Plaza Associates.
Offices and Mall
Citicorp Plaza currently is composed of a 40-story tower with 900,000 square feet of office space and a 350,000-square-foot shopping mall. It cost more than $600 million to build, and is owned by Prudential.
Dale Turner, a Prudential spokesman, said he could not disclose terms of the partnership arrangement or the cost of the planned expansion. However, real estate sources estimate the new construction will cost between $450 million and $600 million.
Turner said the partnership has yet to select an architectural firm to design the new buildings, although a decision should be reached by the end of the year. Construction on at least one of the towers is expected to begin in the first half of 1988.
All development approvals are in place, Turner said, although whatever design is eventually chosen will have to be approved by the city--a sometimes difficult and lengthy process.
Quest for Tenants
An even greater task facing the developers may be finding tenants for the new towers when they finally open.
The first tower probably won't be completed until 1990 or 1991. At least two other new skyscrapers are expected to be completed before then, which could put the new Citicorp buildings at a serious disadvantage.
"There's going to be a lot of competition among developers by the time the (Citicorp) building comes onto the market," said Ray Lepone, senior marketing consultant for the downtown office of Grubb & Ellis, a commercial brokerage firm.
Mitsubishi is the latest Japanese firm to get involved in the Los Angeles real estate market. They've come here, in part, because building in Tokyo is an extremely difficult and expensive proposition, and a favorable foreign-exchange rate allows them to stretch their money further in the United States.
The appreciation potential of American real estate is also better than that of Japanese property.
About two weeks ago, Asahi Urban Development Corp. purchased the 100 Wilshire office tower, Santa Monica's tallest, for a reported $73 million.
A syndicate financed by Tokyo-based real estate giant Yasuda has reportedly agreed to buy downtown's Broadway Plaza for between $200 million and $225 million, and Sumitomo Life Insurance purchased the new 1000 Wilshire office building next to the Harbor Freeway earlier this year for $145 million cash.
Aoki Corp. is involved in a planned $160-million complex at Figueroa and Temple streets, and Mitsui Fudosan is taking part in a $200-million, 50-story office tower expected to break ground at Wilshire Boulevard and Figueroa later this year.
Shuwa Investments Corp. has bought several properties in and around Los Angeles during the past 18 months, including downtown's twin-towered Arco Plaza for $620 million cash.
Prudential is already the largest real estate owner and developer in the United States, with a $27-billion portfolio. In addition to Citicorp Plaza, its Los Angeles area holdings include the Bunker Hill Towers downtown, the Sherman Oaks Galleria and half of the Century Plaza Towers and Beverly Hilton Hotel. It also owns the Empire State Building in New York and 90% of the Ritz Carlton Hotel in Laguna Niguel.
Ayrshire has been involved in several projects, including some government buildings, in Texas and other parts of the nation.