Korean Investors View Wilshire as ‘Main Street’

New York developer Donald Trump may have brought the paparazzi and the publicists to the east end of Wilshire Boulevard, but he is hardly the first investor to rediscover the area.

For the last three years, Korean investors have been buying office buildings, hotels and shopping centers in the Mid-Wilshire district. The wave of investment is breathing new life into a historic area and changing its character.

“Wilshire Boulevard has become the Main Street of Koreatown,” said Richard Schnell, senior vice president of Cushman Realty Corp. of Los Angeles.

So far, Korean investors have spent at least $130 million on Wilshire Boulevard office buildings since 1987, according to Cushman Realty.

In the last six months alone, investors from Korea bought the 12-story Wilshire Court Building at 3807 Wilshire and part of the Wilshire Park Place building at 3700 Wilshire. A third complex, the 12-story Central Plaza, 3440-70 Wilshire, sold in November to Zufu Properties Co. Ltd., a Hong Kong-chartered company said to be controlled by Koreans.

Meanwhile, major Korean institutions are setting up shop on Wilshire. California Korea Bank and Hanmi Bank both have established headquarters in the Mid-Wilshire district in recent months, while the Korean Consulate purchased the former Gibraltar Savings building at 3243 Wilshire two years ago.

“We want to be close to our customers, who are primarily Korean,” said Seung Sung Kim, vice president of California Korea Bank. Korean investment on Mid-Wilshire is only part of the larger story of the Koreatown boom. Wilshire Boulevard has become the northern border of the area that has become the largest Korean community outside Korea itself.

“Koreatown is a city within a city,” said Eugene Page, principal and director of international relations in the downtown Los Angeles office of the Faulkner Co.-Knight Frank Baillieu.

“The area runs the gamut from mini-malls, major office buildings, apartment buildings, hotels, restaurants, churches and even health spas,” Page said.

Both small investors with $1 million or less and billionaire corporations are active in the Mid-Wilshire market. Lucky Gold Star Inc., one of the largest Korean conglomerates, bought an undisclosed portion of the Wilshire Park Place building from Bechtel Investments Realty Inc. of San Francisco.

One very active Korean real estate investor in Mid-Wilshire is Steven Ha. Through Olympus Properties, Ha bought the former Texaco headquarters at 3350 Wilshire three years ago and renamed it Korea Center. This winter, he bought the 12-story Wilshire Court building at 3807 Wilshire.

Ha, who earned a degree in electrical engineering from UCLA and worked at Hughes Aircraft as a research engineer, become involved in real estate in the late 1970s. Today, he is a real estate syndicator, which means he buys property and resells it to limited-partner investors, while staying on as a property manager.

The investment activity in Mid-Wilshire by a new generation of investors contrasts sharply with the doldrums that the area’s office market experienced for much of the 1980s.

By the late 1970s, the area had declined in prestige as an office center. IBM abandoned Mid-Wilshire for downtown Los Angeles, while Texaco went to Universal City and Carnation to Glendale. Two years ago, vacancy rates in Mid-Wilshire office buildings were a gaping 41%, according to Cushman Realty.

With no new office buildings finished since 1985, the vacancy rate in Mid-Wilshire office buildings has shrunk to 12.6%. Investor Ha, however, said that tenants are coming back to Mid-Wilshire because the area is “convenient and economical.”

“The rent is still cheap,” he said. “The parking space is cheap, particularly compared to the downtown area. Unless you need a super-prestigious office, Mid-Wilshire is a better deal.”

Significantly, the Koreans are attracted to the Mid-Wilshire market partly because it is affordable.

Unlike Japanese investors, who typically cherry-pick the real estate market for the most expensive--and the safest--buildings, such as the Bel-Air Hotel, the Biltmore Hotel and office complex and the Marriott Hotel in Century City, Korean investors appear willing to buy older buildings, in many cases with the intention of renovation and finding new tenants for empty floors.

“It’s much cheaper to buy buildings in Mid-Wilshire than to pay for new construction,” said Robert Lee, a Korea-born broker with Tower Realty Services Inc. of Los Angeles. “The office market has been unattractive to American investors for quite a long time, so the price of buildings has come down.”

The Korean buyers have been “willing to commit to a (market) area that other investors view as soft,” said Rick Merritt, executive vice president of Los Angeles-based Merritt Real Estate Group. The price of Mid-Wilshire office buildings hovers around $125 a square foot, or less than half what similar buildings would cost on the Westside or in downtown Los Angeles.

Many U.S. investors shun older Mid-Wilshire buildings, because owners must soon retrofit those buildings with sprinklers, to conform with the law passed by the Los Angeles City Council shortly after the disastrous First Interstate Tower fire in 1988.

Adding to those costs is that most of the buildings that require fire sprinklers also contain asbestos, the cancer-causing fiber that was widely used as fireproofing before the 1970s. Since the installation of sprinklers often disturbs asbestos, many Mid-Wilshire building owners will have to pay for costly asbestos cleanups as well.

Korean investors are willing to buy “bargain” buildings that are older or have problems, such as some of those on Mid-Wilshire, according to office broker John Howard, because while they bring higher risk, they also offer greater potential profit if they can be turned around.

“The Koreans want to add value to buildings,” Cushman Realty’s Schnell said.