Son Strives to Shine in His Father’s Shadow
Unlike his father, who makes headlines on both sides of the Pacific, Takaji Kobayashi prefers to keep a low profile.
Careful not to outshine his father, the younger Kobayashi, known as T.K. at the company’s U.S. headquarters in Arco Plaza in Los Angeles, has worked quietly for the past 10 years amassing $2.7 billion of prime U.S. commercial real estate holdings, 70% of which are in California.
But earlier this month, he unexpectedly made the news when two former Shuwa employees sued the company. One, Hajime Tanioka, alleged in his suit that he was “repeatedly assaulted and battered” by Takaji and Shuwa Executive Vice President Takeshi Shiratori. Another, Dawn Marie Stover, alleged sexual harassment by Kiichiro Kobayashi, another Shuwa executive and Takaji’s first cousin.
Takaji denies the charges and says he will fight the lawsuits. “We believe that these are merely charges raised by disgruntled employees and that they have no merit,” he said in a statement. Still, employees and associates say that Takaji was a shaken man, having lost some face.
Looking to Europe
He would say nothing more about the suits during a 90-minute interview at Shuwa’s offices on the 40th floor of Bank of America Tower at Arco Plaza, where large color portraits of his father hang in the waiting area and one of the conference rooms.
At 35, Takaji Kobayashi is taking Shuwa on a new course. “It used to be a buyers’ market; now it is a sellers’ market,” he explained in his assessment of the U.S. market. “At present it is difficult to find good quality properties.” So he is looking to make Shuwa’s first investment in Europe. The company is nearing an agreement to purchase an office building in London for about $160 million, he said.
“For the future, because Shuwa is a world company, we would like to start investing in Europe. This is the strategy for the next 10 to 12 years,” said Takaji, flanked by Shuwa Vice Chairman Yoshio Yamashita.
Meanwhile, Shuwa hasn’t abandoned the U.S. market. Three weeks ago, it purchased 655 S. Hope St. in Los Angeles for about $30 million from Hammerson Property West USA Corp. Shuwa recently opened escrow for the $60-million purchase of a downtown San Francisco building, but Takaji declined to give details because the transaction is not complete. Earlier this year, Shuwa purchased a vacant lot at Ninth and Hope streets in Los Angeles from Pacific Enterprises for about $23 million. The company also is looking at properties in Philadelphia and Atlanta.
Developing Properties
So far, Shuwa has sold only one building, the Hughes Building in El Segundo. When Shuwa purchased it, Hughes retained an option to buy it back, which it exercised last month, according to Takaji. He wouldn’t disclose the price but said “we made a profit.”
Shuwa, long on the acquisition track, has recently turned to developing some commercial properties. It developed from scratch the $15-million East Coast headquarters of Mitsubishi Electric in New Jersey, a project that was completed last January. The company is now in negotiations to build a 210,000-square-foot research and development facility on land it already owns in Cypress.
The most ambitious project is expected to the development of a 7-acre parcel bounded by Eighth, Ninth, Hope and Flower streets downtown. Takaji said the company is studying three design concepts recently submitted by architectural firms A.C. Martin & Associates; Johnson, Fain & Pereira and Gensler & Associates. He hopes to make a decision soon.
To manage all this, Takaji oversees a staff of 120 and offices in Los Angeles, New York, San Francisco, Boston and Chicago. His staff has increased six-fold since 1985 when Shuwa began buying prime U.S. commercial properties. He now oversees 10 different departments, from legal to leasing to property development. Each department is headed by an American manager and only seven staffers have been dispatched from Japan.
Some who work closely with Shuwa believe that the Japanese company often moves too slowly, particularly on tenant requests, because all decisions must ultimately be made by Takaji. Shuwa has taken property management in-house, except in the case of very large projects such as Arco.
“I hear . . . managing buildings is not one of their strengths,” said one Orange County broker who asked that his name not be used. “Given market conditions here and in all of Southern California, where the tenant really needs to be handled delicately, well in advance of lease expiration and all those sorts of things, they are not tuned into all those things yet in their management style. Some tenants have gotten away, whether it is the result of not getting to them quickly enough or bad management directly, I’m not sure.”
Takaji says Shuwa’s buildings have a 97% overall occupancy rate. When Shuwa purchased the ABC Building in New York, it was aware that the network would be leaving in the fall. Without ABC, the building is about 40% leased, primarily to new tenant ITT, with tenants for another 20% of the structure ready to sign. One Orange County building, Downey Savings & Loan, has a 45% vacancy rate, nearly twice the 24% average for commercial space in Orange County.
Father Strict
Despite Takaji’s insistence that he runs Shuwa in Los Angeles on his own, he never escapes the shadow of his father, Shigeru. When big deals are in the works, he speaks to his father twice a week, although sometimes he’ll go as long as three weeks without talking to him.
When the elder Kobayashi visits Los Angeles, all ashtrays, including Takaji’s, are stashed because the father hates smoking.
Two Very Different
He says that his father is “strict but reasonable” when it comes to business. “After all, the bottom line is numbers. Before you reach the bottom line of numbers, he is very strict. He knows business very well.”
Takaji says he respects his father, but believes that the two of them are very different. “I’m younger, more contemporary. My father is more traditional.” He also said that his father loves his work; he less so.
A graduate of Meiji University, the younger Koyabashi was dispatched to Los Angeles by his father at age 24 to set up Shuwa Investments out of a Bunker Hill apartment, the company’s first office.
Takaji cites one unsuccessful business venture: Shuwa’s development of its first residential properties in California in the early 1980s. They went on the market when interest rates hit record highs, so only 70% of the properties sold and Shuwa only recently has been able to sell the rest.
If his father’s image as an outsider bothers him, Takaji does not show it. Asked what Shuwa’s image is in the United States, Takaji replied, “Honest, but unfortunately, rich.”
