Japanese to Buy Stake in Mall on Rodeo Drive
Two Japanese companies have agreed to acquire a majority stake in a shopping mall being built at Rodeo Drive and Wilshire Boulevard in Beverly Hills, one of Southern California’s best-known intersections, it was announced Monday.
The exact price for the 135,000-square-foot complex, known as Two Rodeo Drive, was not revealed. But the sellers said the amount was “well over $200 million,” a high price for retail space even by Beverly Hills standards.
“This is probably the highest price (per square foot) ever paid for retail space in Southern California,” said Harry D. Hartnett, research director of Kenneth Leventhal & Co., an accounting and real estate consulting firm in Los Angeles.
“This establishes new highs for prices for Beverly Hills,” former Mayor Maxwell Salter said. “It’s mind-boggling.”
The buyers of Two Rodeo Drive are Kowa Real Estate Investment Co. and Sogo Co. Kowa, a subsidiary of the Industrial Bank of Japan, owns buildings throughout Tokyo, while Sogo is said to be Japan’s largest department store chain.
“This is the retail center of the Los Angeles area, and it’s a favorite of tourists and sightseers as well,” said Mitsuhiro Yamamoto, an official with Sogo’s American subsidiary in Southern California. “Yes, it’s expensive, but people know the name.” The sellers are a blend of American and European investors, including New York-based developer Scott Malkin, a British firm known as Berisford International and a San Francisco development firm headed by Douglas L. Stitzel.
Rodeo Drive has blossomed in the past 20 years as a mecca for wealthy cosmopolitan shoppers, both foreign and domestic. Once a strip of beauty parlors, small homes and parking lots, Rodeo Drive began to develop its current international flavor in the early 1970s after the nearby Beverly Wilshire Hotel underwent a major expansion.
The sale announcement comes at a time when overall Japanese investment in U.S. real estate has leveled off. That investment dropped 11% to $14.8 billion in 1989, according to an annual Kenneth Leventhal survey.
The shopping mall, expected to open this fall, will have a European-style ambience and include such retailers as Tiffany, Christian Dior, Cartier and Valentino as well as a restaurant and discotheque operated by Stringfellow’s.
Jack Rodman, a managing partner for Kenneth Leventhal, which represented Kowa in its negotiations, termed the price “competitive,” compared to other premium retail space in urban areas nationwide.
“The real issue is, will the tenants be able to make money” because of the high rents, Rodman said.
The sale is expected to take place in two stages. Kowa and Sogo last week signed a contract to buy 40% of the property, an interest expected to increase to more than 90% after the mall opens. Stitzel will also retain a minor equity interest in the property.
