Checking Out : Japan Bank to Sell Ritz-Carlton, Other Assets; Steep Loss Seen
In the latest sign that Japanese investors are abandoning the U.S. market nearly as fast as they came here a decade ago, the Tokyo-based bank that owns the Ritz-Carlton Huntington Hotel in Pasadena is trying to sell the landmark facility at what is expected to be a steep loss.
The 383-room complex, rebuilt from the ground up after the original Huntington was declared seismically unsafe in 1985, is one of 10 California properties and loans that banking giant Dai-Ichi Kangyo Bank Ltd. hopes to unload in a package sale, sources familiar with the hotel and the bank said Friday.
The other properties include the L’Auberge Del Mar Resort & Spa near San Diego, condominiums and undeveloped land.
The entire portfolio has an estimated book value of $200 million, sources familiar with the offering said, but it is expected to fetch far less because values have plunged since Dai-Ichi began its U.S. buying and lending spree in the 1980s.
“The Japanese seem to be retreating nearly as fast as they came here,” said Linda McKenzie, senior manager of the hotel division of consulting firm Ernst & Young.
Japanese investors began a prolonged buying spree in the United States during the mid-1980s, as they sought to reinvest their profits from a prolonged real estate and stock market boom in Tokyo. At the time, American real estate was far less expensive than similar properties in Japan and offered returns that were far greater.
But California’s real estate market, which once accounted for more than half of all Japanese investment in the United States, collapsed in about 1990 as the state slid into a deep recession. At the same time, Japan’s economy also began to deteriorate.
“The Japanese were blindsided by recessions on both sides of the Pacific,” said Jack Rodman, chief of Kenneth Leventhal & Co.’s hotel consulting operations.
Officials at Los Angeles-based Secured Capital Corp., the financial advisers handling the sale for Dai-Ichi, would not comment Friday.
However, real estate specialists familiar with the efforts to sell the hotel say Dai-Ichi is hoping to get about $65 million. The bank took control of the hotel last month, after the U.S. investors who rebuilt the hotel a few years ago could no longer make the payments on their $100-million loan.
“This is an unfortunate situation for all parties concerned,” Dai-Ichi Vice President Julian Harmon said. “At this point, that is all I really have to say.”
Still, Dai-Ichi may be lucky if it is able to keep its losses under $40 million, some hotel experts say.
Southern California’s hotel market has been hammered--first by the recession, then by the 1992 riots and most recently by the Northridge earthquake.
While hotels in most other parts of the nation are seeing occupancy and rental rates rise, levels have been flat in Los Angeles.
“I don’t see Dai-Ichi getting more than $45 million for the hotel,” one local hotel broker said. “‘If they get 50 cents on a dollar, they’ll be damn lucky.”
Just two months ago, another Japanese lender--Long Term Credit Bank of Japan--took control of the swank Hotel Bel-Air in West Los Angeles after its owners could no longer make the loan payments.
