Southland Developers to Build Malls in Japan
Two leading Southern California real estate developers and a group of major Japanese firms are expected to announce plans today to build four giant retail and entertainment malls in Japan worth more than $3 billion.
The plans call for American-style retail and entertainment complexes--featuring such well-known entities as Wolfgang Puck restaurants and the upscale Sports Club fitness facilities--tailored to a Japanese audience. The projected completion date is late 1999.
The projects in Tokyo and Osaka are being undertaken by WPI.KOLL Asia Pacific Advisors, a partnership of Santa Ana-based retail developer World Premier Investments and Newport Beach-based Koll Real Estate Services. The Japanese partners include the Seibu, Daimaru and Daiei retail chains, Sakura and Fuji banks, Mitsui Real Estate and Nippon Steel.
If the concept is successful, it will be exported to other parts of Asia, said Andrew Sun, chairman and chief executive of WPI.KOLL.
“If you can make it in Japan, you’ve paved the way to go to other countries,” he said.
“If you want to be a global player, you’ve got to go to Asia.”
Their plans are the most ambitious of several U.S. developers planning assaults on Japanese markets, taking advantage of recent moves by the Japanese government to dismantle regulatory barriers that have kept foreigners out of Japan’s retail market. That includes revising Japan’s large-scale retail store law to allow construction of larger shopping complexes and greater flexibility in store hours and operation.
At the same time, fresh opportunities have been created for foreign firms by the dramatic drop in Japanese land prices and the strengthened yen, which makes U.S. goods cheaper.
By teaming up with some of Japan’s leading firms, WPI.KOLL executives are confident they can overcome other hurdles that have stymied foreign developers in Japan, including local opposition and exorbitant distribution costs. WPI.KOLL’s project also has the blessing of Japanese government officials, a draw for prospective tenants.
“Up until this point, we were not willing to deal with the morass of regulations you had to deal with to do business over there,” said D. Michael Talla, chief executive of Los Angeles-based Sports Club Co., which currently operates nine centers in the United States and will be opening its first two overseas centers in the WPI.KOLL projects.
Sun said the developments will be financed privately or, in some cases, by converting the project into securities and selling it to investors abroad.
Over the next decade, WPI.KOLL and its partners say they hope to blanket Japan with as many as 20 such complexes, incorporating high-quality, value-priced retailing with the latest in entertainment, from theme restaurants to interactive games and multiplex theaters.
The competition for these markets has heated up. Last year, Canal City Hakata, an entertainment-retail complex designed by Los Angeles architect Jon Jerde, opened. That project, in the Japanese port city of Fukuoka, attracted 4.5 million visitors in its first two months of operation.
Developer Herbert Miller, founder of American Malls International in Japan, also began looking overseas after he ran out of room in the United States to build his popular Mills discount malls.
“There’s only so many places you can build these things,” said Robert Singer, AMI’s chief financial officer. “We began looking around the world and thought Japan was the next great market.”
Singer said one legacy of the lingering Japanese recession is a greater attention to value by shoppers, who as tourists have become loyal customers of discount shopping malls in Hawaii and California. They are also more sophisticated because of their expanded travel and their exposure to foreign lifestyles through the media.
“They know they can get goods much cheaper abroad than in their own country,” he said.
Singer said AMI hopes to open eight American-style discount shopping centers in Japan over the next decade and is now completing negotiations on several sites.
The risks are considerable. Another big player, Dallas-based Trammell Crow International Japan, is going to wait until the Japanese economy improves and the upheaval in the Japanese regulatory system and retail market settles down.
Sun, of WPI.KOLL, said his company will help smooth the way for its U.S. retailers by working with Japanese partners who are knowledgeable about the local marketplace, from advertising preferences to consumer behavior.
The company is talking with dozens of U.S. retailers interested in entering or expanding in Japan, including the Gap, Eddie Bauer and AMC Theaters. By opening stores in several WPI.KOLL projects, these firms can spread out their start-up costs and increase their volume, making a Japan operation more cost-efficient.
Sun said each project in Japan will have a theme that will determine the design and mix of tenants. For a retail center near the main railroad station in Osaka, the Japanese want to focus on the American lifestyle. The Chicago waterfront is being considered as a model for an entertainment complex on Osaka Bay.
Irv Siegel, director of real estate and worldwide licensing for the Wolfgang Puck Food Co., said his restaurant chain hopes to open its California-style cafes in all four WPI.KOLL locations in Japan.
