European Trust Buys Rodeo Retail Site

By JESUS SANCHEZ

Aug. 11, 2000 12 AM PT

TIMES STAFF WRITER

Suffering a steep loss, the Japanese owners of Two Rodeo--a Beverly Hills shopping center that is home to Tiffany, Cartier and other luxury retailers--have sold the complex to a European family trust for $131 million.

Despite the sharp rebound in Westside real estate values since the 1990s recession, the sale of Two Rodeo represents a $70-million loss for partners Kowa Real Estate Investment Co. and Sogo Co. The companies join the long and growing list of Japanese investors who were burned after a shopping spree in U.S. real estate markets during the late 1980s and early 1990s. Sogo, a major Japanese retailer saddled with billions of dollars in debt, filed for bankruptcy protection in Japan earlier this year.

“They bought it at the top of the market,” said one real estate executive familiar with the shopping center.

The new owners of the shopping center at Rodeo Drive and Wilshire Boulevard are expected to benefit from the substantial increases in Beverly Hills retail rents since Two Rodeo opened about a decade ago.

“There is a tremendous opportunity to develop this brand name and provide a lot of luxury consumer services,” said Pierre N. Rowlin, chairman of London-based Strategic Real Estate Advisors, which represented the buyers of Two Rodeo. Rowlin would not reveal the name of the new owners.

“It’s very rare to put all those [luxury stores] under one roof,” Rowlin said.

The 130,000-square-foot shopping center, which was built on the site of a former parking lot and small shops, marked a dramatic expansion of retail space on exclusive Rodeo Drive, which is jammed with about 80 stores in three blocks between Wilshire and Santa Monica boulevards.

The late San Francisco-based developer Douglas Stitzel spared no expense building the two-level, open-air complex, which features a narrow, private street paved with cobblestones imported from Italy. The center’s 24 spaces attracted some of the globe’s most well-known luxury brands, including Christian Dior and Versace. Stitzel sold majority ownership to the Japanese investors for an estimated $200 million after the project was completed in 1990.

“It’s like an anchor for the street,” said Ron Michaels, president of the Rodeo Drive Committee, a business and promotional group. “It brought in some great tenants.”

But Two Rodeo--designed in the booming 1980s--and its cluster of high-priced stores opened as the economy sank into a deep and prolonged recession. As a result, some of the original tenants failed and some storefronts remained empty for months after the center opened, according to leasing brokers.

Business is booming along Rodeo Drive once again, sending monthly rents skyrocketing to an average of $20 per square foot per month, said Gilbert Dembo, a Beverly Hills retail real estate broker in charge of leasing at Two Rodeo. But rents at Two Rodeo, where many of the leases were written under more favorable terms a decade ago, are about half the going rate.

“Rents on the street have gone up substantially,” said Dembo. “There will be changes in our tenants.”

Dembo said that Christian Dior and Valentino--among Two Rodeo’s original tenants--will be moving out, opening up space to be leased at higher rates.

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Sold!

Here are some of the local trophy properties that Japanese investors have sold off in recent years:

* Hotel Nikko at Beverly Hills, Los Angeles

* Sanwa Bank Plaza, downtown Los Angeles

* Century Plaza Hotel, Century City

* 100 Wilshire Building, Santa Monica

* Taco Bell Corp. headquarters, Irvine

* Biltmore Hotel, downtown Los Angeles

* Shoreline Square, Long Beach