Shuwa Corp.’s $40-Million Deal Latest in Bid for Prime Office, Industrial Real Estate
Shuwa Investments Corp., a Japanese real estate company that paid $620 million for Arco Plaza in downtown Los Angeles last September, has purchased a nine-story office building for $40.6 million near Orange County’s John Wayne Airport and is negotiating to buy almost $160 million more of the airport area’s premier office and high-tech industrial properties.
The investment concern first emerged as a force in the Orange County office market in June, when it purchased the Downey Savings & Loan headquarters building in Costa Mesa for $28 million. Since then, local brokers say, the company has ardently shopped the area and has been offering very attractive prices for prime real estate.
“They want high-quality, well-located, picture-perfect properties,” said Scott Perley, vice president and resident manager at the Santa Ana office of Coldwell Banker.
Among numerous pending transactions, Shuwa Investments, a wholly owned subsidiary of Shuwa Co. Ltd. of Tokyo, is close to sealing an agreement to buy Taco Bell Inc.’s 12-story national headquarters building in Irvine from the Koll Co., according to Koll Co. Executive Vice President Harold Street.
“We have had some serious discussions that both (Shuwa and Koll) expect to lead to fruition,” Street said Friday.
Street declined to state the price being negotiated for the 280,000-square-foot, year-old building in Koll Center Irvine. But a local real estate expert estimated its market value “in excess of $56 million.”
Signed $8.5-Million Agreement
Shuwa is even closer to buying a 55,000-square-foot building at 1063 McGaw Ave. in Irvine, said Jerry Cole, an industrial broker for Coldwell Banker. Cole said that Shuwa has signed an agreement to pay $8.5 million for the industrial building.
The Japanese investment company, which said in September that it had about $1.7 billion invested in real estate in the United States and intended to invest up to $2 billion more, also has shown “serious interest” in buying nine buildings in the Von Karman Corporate Center, one of Irvine’s newest and fanciest high-tech parks, according to Dan Bowers of Los Angeles-based Ratkovich, Bowers & Perez Inc., which owns the development.
The nine glass, steel and concrete buildings that Shuwa is eyeing contain a total of 454,000 square feet of office space, all but 34,000 square feet of which are leased to such major tenants as Xerox, Ultrasystems, AST Research Inc. and Pacific Bell.
The value of the property was estimated by a local broker at “up to $100 million.”
Paul H. Fath, recently hired to manage Shuwa’s Orange County properties, said that the company a month ago completed its $40.6-million purchase of the nine-story office building from McDonald Douglas Realty at 19000 MacArthur Blvd. Also, Shuwa recently bought a high-tech building in the Irvine Co.’s Spectrum business park for $9.2 million.
Built Condominiums, Homes
Four years ago, Fath said, Shuwa built 60 condominiums and 30 single-family homes in Anaheim Hills that it now uses as rentals but plans to sell when property values rise sufficiently.
Typically, Perley said, such properties are not listed for sale. But they generally are available “at the right price.”
Shuwa can offer higher prices for properties than many of its competitors, Fath said, because it pays in cash and borrows its money from Japanese financial institutions at an interest rate that is less than half of that charged by American lenders.
On the flip side, Fath said that Shuwa, which is principally interested in high-rise office buildings, wants to take advantage of the current overbuilt office market, which is depressing office real estate prices.
Aiming for Substantial Income
Shuwa’s strategy, Fath said, is to buy properties to hold in its portfolio in the belief that eventually it can raise rents and create substantial income. Fath, who previously was a property manager for Bank of America in Orange County, said that when Shuwa hired him two months ago, company officials “said we are going to be investing very heavily in the Orange County area.”
During an interview earlier this week in his office in the Downey Savings & Loan building in Costa Mesa, Fath pointed to a fistful of messages on his desk from local brokers with buildings for sale.
Fath said Shuwa is impressed by the rapid urbanization and rising property values in the Orange County area.
