Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, June 9, 1995 TAG: 9506090092
SECTION: BUSINESS PAGE: A-17 EDITION: METRO
SOURCE: ASSOCIATED PRESS
DATELINE: NEW YORK LENGTH: Medium
Spurred by a need to salve economic wounds at home, Japanese investors have sharply accelerated their retreat from the U.S. real estate market they plunged into last decade, according to a study released Thursday.
Japanese owners had nearly $6.4 billion in properties in the sales pipeline in 1994, and $3.4 billion the previous year, said the 10th annual survey on Japanese investment trends by E&Y Kenneth Leventhal Real Estate Group.
``It's a significant retreat,'' said Jack R. Rodman, director of the group's Pacific Rim work.
``Over the next five years, you'll see the vast majority of the $77 billion the Japanese invested in U.S. real estate since 1985 change hands.''
He cited last month's bankruptcy filing involving the Japanese owners of New York's storied Rockefeller Center as an indication of the aggressive strategy the Japanese have adopted in dealing with their problem real estate.
Once, U.S. golf courses, hotels, skyscrapers and resorts looked golden to investors clutching yen.
In the 1980s, Japanese investors snapped up trophy U.S. properties, including Rockefeller Center. The wave of investment fanned concerns of an economic invasion and counter-accusations that such critics were racist.
Because of the tremendously inflated value of Japanese stocks and real estate, Japanese investors at that time found it easy to borrow to make the investments.
Then the bubble burst. Commercial real estate prices fell in the United States, and a recession in Japan left many companies in poor shape.
Commerce Department figures show the Japanese influx of new investment in the United States, which reached an annual peak of $12 billion in 1990, fell to $500 million last year.
Only recently have Japanese companies been willing to consider selling tarnished U.S. properties.
``In 1992 to 1994, they were reticent to acknowledge that values in properties had fallen,'' said Andrew Ratner, national director of real estate and services at Cushman Realty Corp. in Los Angeles. ``This year, there's a significant increase in selling.''
Other reasons for the sales:
The weak dollar. In 1990, 145 yen were required to repay every dollar borrowed; now only about 85 yen are needed. Dollar-denominated losses can be reduced by selling now.
The Kobe earthquake. Construction companies that were once large U.S. investors now want to repatriate home money to help rebuild.
Demand from U.S. buyers is increasing. About $10 billion in equity capital has been accumulated to acquire problem Japanese loans and assets, Rodman said.
The Leventhal report predicted a pickup this year, with sales totaling from $5 billion to $10 billion.
But Ratner took the view that some Japanese would buck the trend and hold onto their property.
``When the Japanese came here, they generally bought the best properties in the best locations,'' he said. ``The chances of those properties coming back more quickly is greater.''
by CNB