Lender Said to Be in Talks to Sell Pebble Beach
The Japanese lender that controls Pebble Beach has held recent negotiations to sell the legendary seaside golf resort to an American development group for at least $500 million, said a leading Japanese real estate specialist on Friday.
Although the owner of the premier golf resort vehemently denied any possible sale, several real estate experts said the Japanese lender is considering selling the Monterey Peninsula property for several reasons, including continuing difficulties expanding the resort.
“The public statement is that it’s not for sale, but there have been recent sale negotiations and discussions. Documents have changed hands,” said Jack Rodman, director of the Asia-Pacific practice for E&Y; Kenneth Leventhal Real Estate Group. “There is a high degree of buyer interest in this property.”
High-level negotiations in Tokyo between Sumitomo Bank and American developers regarding the trophy property have been held in the last few weeks, sources said.
Lone Cypress Co., named after the landmark tree on the peninsula’s famed 17 Mile Drive, is the investor partnership that owns Pebble Beach, one of the most famous public American golf courses.
Lone Cypress is owned by Taiheiyo Club Inc., which operates several prominent golf courses in Japan, and Sumitomo Credit Services Co., one of Japan’s biggest issuers of Visa cards. Sumitomo Bank, which has stakes in both companies, financed the 1992 package deal that included Pebble Beach golf course and lodge, three nearby golf courses and the Inn at Spanish Bay.
“They need to sell, they will sell and it makes sense to sell,” Rodman said.
Executives at Sumitomo California said they could not comment, and Paul Leach, a managing director at Lone Cypress, vehemently denied the rumors.
“It’s not for sale. There have been rumors for a long time,” he said.
Japanese golf tycoon Minoru Isutani lost about $350 million when he sold Pebble Beach to the Lone Cypress group in 1992. Isutani paid a reported $850 million when he bought the resort in 1980 from a partnership headed by oilman Marvin Davis.
The current owners are in the midst of ambitious development plans to obtain approval for 350 single-family homes and a large 18-hole golf course on land they own near Pebble Beach.
In the works for years, those expansion plans have run into strong opposition from local homeowner and environmental groups who believe the Japanese owners aren’t sensitive to their needs and don’t value Pebble Beach as a national asset, said Zan Hanson, an attorney working with those groups.
“We feel we are very sensitive to the environment,” said Leach, who added that the environmental impact report on the project should be completed by the end of the month.
But a real estate specialist familiar with the sale negotiations said: “The Japanese feel there is a big potential in the development and they can’t harvest the value. There is a sense that an American developer could do a better job shepherding it through the entitlement process.”
Whether such negotiations would lead to a sale of Pebble Beach remains to be seen.
Whereas Japanese investors in recent years have quietly and sometimes not so quietly sold billions of dollars worth of California real estate for which they paid top dollar in the late 1980s, some Japanese banks are now holding on to the properties here on the promise of a real estate recovery.
During the California real estate boom of the late 1980s, Japanese banks financed acquisitions and construction projects throughout Southern California. Some of those lost half or more of their values during the real estate downturn.
The Japanese control more than $130 billion in U.S. real estate and real estate loans, according to E&Y; Kenneth Leventhal. That’s down from a peak of $177 billion in 1991, but it’s still the largest amount of U.S. property owned by foreigners.
Buyer interest in Pebble Beach has always run high. Several venture capital funds, former owners and other real estate developers have reportedly shown interest in the landmark.
One buyer mentioned is KSL Recreation Corp., an affiliate of Kohlberg Kravis Roberts & Co., the New York-based leveraged buyout specialist, sources said. KSL owns the Doral Resort & Country Club in Dade County, Fla. Company executives could not be reached for comment Friday.
Lowe Enterprises Investment Management Inc. of Los Angeles, which manages a portfolio of about $1 billion worth of real estate for pension funds, has been mentioned as a possible buyer, but executives there said Lowe is not in any type of negotiations with Pebble Beach.
John Platt, a president of destination hotels and resorts in Lowe’s Santa Barbara office, said he is not aware of any deal.
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