Japan's Investments in US Lose Jewel-Like Lustre

Article excerpt

JAPANESE investors are learning the hard way that owning United States real estate is not a quick path to fortune.

The latest example is Mitsubishi -- majority-owner of the Rockefeller Center complex here, which filed for bankruptcy protection last week.

The Japanese have watched the value of their US holdings, which have been particularly extensive in California, Hawaii and New York City, shrink as US property values have plummeted in recent years. Plagued by financial problems at home, some Japanese firms are bailing out of US holdings at cut-rate prices.

Japanese companies' total market value losses on US real estate holdings have been "at least $25 billion since the mid-1980s," reckons Dale Strickland, senior manager with Kenneth Leventhal & Company, Los Angeles, an accounting firm.

But when calculated in Japanese yen, the companies' losses have been far greater since the Japanese yen has risen sharply against the dollar in recent years.

From 1985 to 1993, Japan made some $77 billion in direct real estate investments in the US, Mr. Strickland notes.

Some of the sites were well known, such as Rockefeller Center and Pebble Beach golf course in Northern California. (Pebble Beach was subsequently sold.)

The 12-building Rockefeller Center complex here, first opened in 1932, is a well-known symbol of not only New York City commerce but one of America's wealthiest families. The center includes the 6,000-seat Radio City Music Hall, the art-deco General Electric Building. It is home to the National Broadcasting Company. And tourists come from around the world to see the giant Christmas tree set up each fall in front of a skating rink at the center.

Rockefeller Center has been controlled by Mitsubishi Estate Company, an arm of Mitsubishi Group, a Japanese conglomerate, since 1989. The Rockefeller family has maintained a 20 percent stake in the partnership. Over strenuous objections of the Rockefellers, Mitsubishi filed for bankruptcy protection for the complex, insisting it was a victim of downward spiraling real estate values.

The Rockefellers countered that Mitsubishi paid $1.4 billion for the complex, but has rung up losses of $600 million. As property values have plummeted, so too have rents, which has reduced the center's cash flow.

For the immediate future, the bankruptcy is not expected to make any appreciable difference in the way Rockefeller Center operates.

In filing for bankruptcy protection, Mitsubishi is saying that it is seeking a way "to continue {its} support" of a historic landmark in the US, not to somehow get out of the venture, says Michael Claes, a Mitsubishi spokesman. …