Japanese Appetite for Downtown S.D. Property Continues
Demonstrating Japanese investors’ growing appetite for San Diego real estate, Japan’s largest trading company, C. Itoh & Co., and two other Japanese corporate giants have become investors in the newest of downtown San Diego’s crop of high-rise office buildings.
Tokyo-based C. Itoh is investing in the $75-million, 20-story Cabot, Cabot & Forbes Corporate Center through its American investment arm, J.C. Investment & Realty Co., sources said. Ground-breaking on the project, situated on a full block bounded by B, C, India and Columbia streets, is scheduled for today. Completion is due in late 1989.
Other limited partners in the building are Daiwa Real Estate, the investment arm of Daiwa Securities of Tokyo, Japan’s second-largest securities brokerage firm, and Konoike Construction, based in Osaka. Construction lender for the project is also Japanese--Sumitomo Bank.
Cabot, Cabot & Forbes, the 344,000-square-foot project’s Boston-based developer and general partner, confirmed the involvement of the three Japanese firms Wednesday. Regional vice president Gary Toler said the Japanese’s participation demonstrated their “healthy demand for good quality investment with nationally reputable developers.”
Toler said his firm recruited the Japanese investors through contacts made by construction lender Sumitomo Bank. An agreement was signed in March.
The Cabot, Cabot & Forbes building is the latest of many real estate transactions in Southern California and in the United States involving Japanese money. Nationwide, the Japanese invested $12.8 billion in U.S. real estate in 1987, a 70% increase from the $7.5 billion invested in 1986, according to a study released in April by Kenneth Leventhal & Co., a Los Angeles-based accounting and consulting firm with an office in San Diego.
“The investment yields are higher here, versus the 2% to 3% they can earn in their own country,” said Robert Fox, project manager of the $150-million Aventine project in north San Diego, a partnership of three Japanese investors with San Diego-based Naiman Co.
Fox said the Japanese have also been drawn by the “general overall acceptance (in Southern California) of foreign investment.” Public sentiment, however, has turned against Japanese investors to some extent in Hawaii, where a buying frenzy has caused the housing market to skyrocket, Fox said.
The Cabot, Cabot & Forbes project is across the street from the Emerald Shapery Center, a $130-million, office-hotel complex that is a joint venture between Tokyu Corp., the Tokyo-based parent company of Emerald Hotels, and Shapery Enterprises of San Diego. Now under construction, the project fronting Broadway will include a 450-room Emerald Hotel and an 30-story office building.
Other San Diego high-rises owned by Japanese interests include the 24-story Great American First Savings Bank building at 600 B St., purchased by Kowa Trading Co. of Japan in 1982 for about $50 million.
Aventine, on which construction recently began, will include a 400-room Hyatt Hotel, 212,000 square feet of office space, three restaurants and a health club. The project’s Japanese investors are Shimizu Construction, Nissho Iwai and TSA International.
Last year, the largest Japanese investment ever in San Diego County real estate was completed when Sports Shinko Co. of Osaka bought La Costa Resort Hotel & Spa in Carlsbad for $250 million.
Until the past year or so, Japanese investors may have been reluctant to plunge into the downtown San Diego real estate market because of unusually high vacancy rates in existing office buildings, making investments somewhat risky. But that attitude seems to have changed lately, with Japanese buyers aggressively scouting the county for properties, development executives said.
“The Japanese will discount higher-than-average vacancy rates when trophy-type properties are concerned,” said Jack Barthell, a managing partner in Kenneth Leventhal & Co.’s Los Angeles office. “There are only so many office towers in San Diego and if (the Japanese) want to play in that league, their game should be to develop.”
C. Itoh, a worldwide trading company whose U.S. subsidiary posted revenues of $7.7 billion last year, has been involved in several other U.S. projects through its Los Angeles-based J.C. Investments unit, sources said. Daiwa Real Estate, however, is getting its feet wet in the U.S. market with the Cabot, Cabot & Forbes project, Toler said.
Konoike Construction is a partner with C. Itoh and Seattle-based developer Kemper Freeman in a $260-million, hotel-office-retail development in Bellevue, Wash., called Bellevue Place.
The Cabot, Cabot & Forbes Corporate Center is already 50% leased, with tenants that include five law firms. Kraig Kristofferson and Jim Hollis of Coldwell Banker are the building’s leasing agents.
Cabot, Cabot & Forbes, whose majority owner is Marshall Field V, scion of the Chicago department store family, owns 15 million square feet of office and industrial buildings nationwide.
