By ELIZABETH HAYES
With the Asian financial crisis deepening, an increasing number of Far East investors are looking to unload their Los Angeles-area properties.
Those divestitures are being undertaken primarily by the Japanese, who own a combined $10 billion in L.A.-area properties, and Koreans, who own at least $200 million worth, sources said.
The Koreans have become particularly aggressive sellers in recent weeks. Much of their $200 million in L.A.-area properties have been put up for sale in the last couple of months due to the financial crisis, said broker Michael Lee at Charles Dunn Real Estate Services Inc.
"Everything is up for sale," Lee said. "They need the money over there. They must use the assets overseas."
The Japanese are going about their divestiture more methodically, but on a larger scale. Nationwide, they will unload between $3 billion and $5 billion in U.S. real estate assets this year, said Jack Rodman, director of Asian real estate services for E & Y; Kenneth Leventhal Real Estate Group. That's roughly in line with recent years.
Rodman said he had not yet computed an estimate for 1998 Japanese divestitures of L.A.-area properties, but if it is proportional with the amount of L.A. holdings in Japan's overall U.S. property portfolio, Japanese investors will unload between $450 million and $750 million in L.A. properties this year.
"I think we're going to see more sales by Japanese this year than last," said Martin Sawa, first vice president at CB Richard Ellis.
Several factors are making it more advantageous for Japanese investors to sell their L.A.-area properties now than in years past. First, the U.S. dollar has strengthened sharply against the yen. Since proceeds from the sale of L.A. properties are in U.S. dollars, the effective price realized in yen is far greater now. Second, L.A. property values have been rising steadily (dramatically in certain areas of town). Third, U.S. capital gains taxes have been dramatically reduced in the last year or so.
"I'm telling foreign investors it's a great time to sell," said Rodman. "We're starting to see prices at about replacement cost, except downtown."
Dick Ziman, chairman of Arden Realty Inc., a Beverly Hills-based real estate investment trust, said he expects the Japanese to realize the benefits of selling their U.S. real estate assets, and act on that realization.
"We're anticipating you're going to see good business judgment dictate the Japanese be sizable sellers of commercial real estate," he said.
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