New Buyer for Pebble Beach Course Found

Minoru Isutani, the controversial, debt-burdened Japanese businessman who paid an estimated $850 million for Pebble Beach Golf Links in 1990 amid a flurry of Japanese purchases of signature U.S. properties, is selling the famed course.

Isutani--whose reputed ties to Japanese gangsters helped derail his hard-fought effort to offer private memberships at the course--has signed a letter of intent to sell Pebble Beach and related properties to other Japanese investors calling themselves Lone Cypress Co.

Although Lone Cypress did not reveal the purchase price, it is estimated to be $500 million. With monstrous loan payments coming due, Isutani had been renegotiating his loan terms over the last several months with his bankers in Tokyo.

Ironically, the new owners, too, have a murky past. Lone Cypress is owned by Taiheiyo Club Inc., a golf course operator in Japan, and Sumitomo Credit Service Co. Ltd., a finance company.

Taiheiyo first made headlines in 1986, when prosecutors charged that its owners had improperly borrowed $76 million from Heiwa Sogo, a savings and loan they controlled. Heiwa Sogo later had to be bailed out by Sumitomo Bank to avoid insolvency and was found guilty of breach of trust. One Heiwa Sogo executive was sentenced to 3 1/2 years in prison.

At the time the scandal broke, prosecutors also accused Taiheiyo of setting up a phony land sale with the help of gangsters to hide cash problems. Last summer, Taiheiyo was accused of selling a golf course, Iwama Country Club, to gangster boss Susumu Ishii, using trucking company Sagawa Kyubin as a go-between.

Masatsugu Takabayashi, chairman and president of Lone Cypress Co. and president of Taiheiyo Club, said in an interview Wednesday that Taiheiyo should not be responsible for problems in 1986, when the company was under different management. He also denied selling Iwama Country Club to gangsters.

Takabayashi said at the time he thought Sagawa was a good company. Sagawa is now at the center of a major scandal involving political payoffs and billions of dollars in loans to gangsters.

Lone Cypress expects the deal for Pebble Beach to close by March 31. Takabayashi said the new owners would not go ahead with Isutani’s controversial plan to sell memberships at Pebble Beach and will seek good relations with the community.

“We plan to establish (a reputation) as a management sensitive to the community so that we can clean off the black cloud,” Takabayashi said.

The proposed agreement--reached Jan. 10 but a well-kept secret until its announcement Wednesday by Japanese and U.S. executives of Lone Cypress Co.--adds another interesting twist to Pebble Beach’s rich history.

Paul C. Leach, a director of Lone Cypress Co. and private investment banker in San Francisco, said the investors were drawn to Pebble Beach by the promise it holds, despite the current recession. “It’s probably the world’s finest golf resort complex,” Leach said. “It’s a jewel.”

In 1919, the grandnephew and namesake of telegraph inventor Samuel F.B. Morse raised $1.4 million to buy chunks of the Monterey Peninsula owned by heirs of the Big Four railroad magnates--Charles Crocker, Leland Stanford, Mark Hopkins and Collis P. Huntington.

The deal included the Del Monte Forest, where a lodge and a golf course were under construction along a rocky stretch of central coast known as Pebble Beach.

Over the next several decades, the properties passed through several owners and became world famous as a mecca for top golfers and celebrities such as Bing Crosby, for whom a professional-amateur tournament was named.

In 1983, Pebble Beach was bought by Miller, Klutznick, Davis & Gray Co., a real estate partnership headed by oilman Marvin Davis. The group began hunting for possible buyers a few years later.

They finally found one in Isutani, a golf fanatic and developer of resort properties in the United States and Japan who saw Pebble Beach as the trophy course of a lifetime. In a debt-heavy transaction, he bought the Pebble Beach resort in September, 1990. In addition to Pebble Beach Golf Links, the resort includes the Spyglass Hill, Spanish Bay and Del Monte courses, plus two hotels--the Lodge at Pebble Beach and the Inn at Spanish Bay.

A few months later, a prestigious Japanese newspaper reported that Cosmo World Corp., Isutani’s Beverly Hills-based golf course development company, planned to market more than 700 “exorbitant” memberships in Japan, at an estimated $740,000 each, to help pay off the debt. The report suggested that the membership plan would effectively close Pebble Beach to the public.

With greens fees of $200, Pebble Beach, some would argue, already was effectively out of reach for many golfers. But an outcry soon arose among residents and environmentalists in the Monterey Peninsula. Golfers said they feared that the course would become an exclusive enclave.

While Isutani fought to have his plan approved by the Monterey County Board of Supervisors and the California Coastal Commission, repeated reports of his gangster ties undercut his efforts. In January, the embattled Isutani gave up on the membership plan.

The other big loser in the deal, in addition to Isutani, appears to be Mitsubishi Trust & Banking Corp., which had lent Isutani $584 million.

If many of Isutani’s maneuvers raised the hackles of Monterey Peninsula residents, golfers generally praised his handling of the course during his short-lived ownership.

“Pebble Beach was in terrible shape (during the Davis partnership), in worse shape than many public courses,” said Desmond Muirhead, a golf course architect with links in the United States and Japan. “Isutani has brought it back to life.”

Times staff writer Leslie Helm in Tokyo contributed to this report.