Advertisement

A LOS ANGELES TIMES - FINANCIAL TIMES SPECIAL REPORT : The Next California--The State’s Economy in the Year 2000 : The Next California / THE STATE’S ROLE IN THE WORLD ECONOMY : Financial Times Perspectives on California : The View From Abroad / TOKYO : Domestic Woes Slow Japanese Buying Binge

Share
The Financial Times

The California economy produces more goods and services annually than Canada. And with each passing year, its prosperity becomes increasingly linked to its success in the global economy. As the state approaches a new millennium, it faces challenges that will help determine whether it will become an even bigger economic force in the world or whether it will fade amid mounting problems at home. Financial Times correspondents, based both here and in capitals abroad, give their impressions on the California economy through a special lens.

*

To many Japanese investors, California is the land of broken dreams.

During the boom times of the 1980s asset “bubble” here, Japanese companies bought some of California’s prime real estate, banking on hopes of sharply rising rents and property prices.

But they were hit by both the collapse of U.S. property prices and the sharp plunge in property and stock prices at home, and investors were forced to turn over their property to their creditors or sell it at a loss.

Advertisement

A case in point is the Bel-Air Hotel, the upscale hostelry on the Westside of Los Angeles. The Sazale group, a Tokyo hotel company, bought the 92-room hotel for $110 million, a record $1.2 million per room, in 1989.

By 1994, it had surrendered the property to the Long-Term Credit Bank of Japan, its creditor, which sold it last May to the Brunei royal family for about $60 million.

The bank also lent $125 million to a U.S. developer to invest in a hotel, office and retail complex in northern San Diego County. The bank sold the complex this year to an investment fund for $75 million.

Dai-Ichi Kangyo Bank was involved in an investment in the Ritz-Carlton Huntington Hotel in Pasadena. Minoru Isutani, a real estate developer, lost $341 million after purchasing the Pebble Beach Golf Club in 1990.

The list goes on to Sony and Matsushita, the Japanese electronics giants that acquired Hollywood film studios. Matsushita has managed to wriggle out of its investment by selling 80% of its stake in MCA to Seagram, the Canadian beverage company, and Sony is said to be looking for investment partners.

With the economic climate still subdued in Japan and the country’s banks facing mounting bad loans, not even the optimistic are dreaming of a new California buying binge by Japanese investors.

Advertisement
Advertisement