Japanese Buyer Modifies Bid for Riviera Club : Plans Now Call for an Initial Stake of Only 49% Instead of Full Acquisition

Perhaps hoping to defuse criticism, the still-secret Japanese buyer of the landmark Riviera Country Club has scaled back its purchase plans and now intends to initially buy only a 49% interest in the Los Angeles golf and tennis resort.

Laaco Ltd., the partnership that currently owns the club, said Thursday that the Japanese buyer has agreed to pay $52.9 million to acquire the minority stake. Laaco will retain the 51% majority interest.

When the sale was disclosed in May, the Japanese company had planned to buy the entire 160-acre Pacific Palisades complex for $108 million.

But controversy has surrounded the proposed deal ever since. Members--who learned of the proposed sale from news reports--had feared that new owners might change the venerable golf and tennis club, which dates to the 1920s and was a favorite haunt of film stars Douglas Fairbanks, Mary Pickford and Errol Flynn.

Japanese Investors ‘Sensitive’

Adding to the uncertainty was the secrecy surrounding the identity of the Japanese firm, which has requested anonymity until the transaction is completed.

“If everything was going smoothly and they wanted the property, they would have bought it,” said Yukuo Takenaka, who specializes in Japanese business for the accounting firm Peat Marwick Main in Los Angeles.

He said Japanese investors have become more sensitive to criticism as a result of their experiences in Hawaii, where some of their big investments have triggered resentment. “The more reasonable people are more careful not to further irritate or deteriorate the U.S.-Japan business relationship,” Takenaka said.

William D. Keogh, investment director at the Faulkner & Co. real estate firm, said, most Japanese investors “are reluctant to rock the boat. If they perceive the Riviera sale to cause a major Japan-bashing situation, I think they will probably not proceed with the acquisition.”

The new agreement in principle disclosed Thursday appeared structured to give the Japanese buyer flexibility. The pact provides for the Japanese company to have a one-year option to buy Laaco’s 51% interest. If it does not exercise the option, Laaco would have the right to reacquire 100% ownership of the club.

Frank G. Hathaway, managing partner of Los Angeles-based Laaco, insisted in an interview that the negative publicity had nothing to do with the revised terms. “It would provide for a more orderly transition and better serve the interests of the members, and the buyer and seller both thought it was OK.”

The Riviera called an emergency board of governors meeting for Thursday evening to inform its members. Joey Rosenberg, chairman of the golf club’s board of governors, said he has been aware for the past two weeks of a possible change in in the sale.

“I don’t think the initial response of the membership scared them away at all. I think it is a matter of practicality. To avoid culture shock, maybe they wanted a year or two of the advice of the Laaco management,” Rosenberg said.

No Changes Planned

Meanwhile, however, Riviera members have contributed to a fund to hire a lawyer to represent their interests. The lawyer has been in touch with the Japanese buyer through letters passed on by Laaco’s attorneys.

A response came on blank letterhead paper with no signature, referring to the Japanese firm only as “the purchaser.” It assured members that the buyer did not plan to make major changes. “I don’t think there is any question that not identifying themselves does create some of the anxiety” said Rosenberg. “They have been as cooperative as they can be in terms of reassuring membership that they plan to honor existing memberships and not ask for additional assessments or fees.”

Keogh of Faulkner & Co. said Japanese companies are used to withholding their identities until a deal is completed. “If it was announced XYZ was going to buy the property and they didn’t, they would lose face if they were in Japan. They tend to continue business policies here that they have there.”