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Golf Course Fiasco for Japanese Investor, Sign of More Profound Problems

February 21, 1992 GMT

SAN JOSE, Calif. (AP) _ Japanese tycoon Minoru Isutani knew weeks ago that his debt-laden empire couldn’t keep its American prize, the spectacular Pebble Beach Golf Links that he has agreed to sell at a 40 percent loss.

″We learned a very severe lesson from this transaction,″ he said just before the year ended. ″I am afraid of making any investments in the U.S.″

Isutani’s countrymen, who made headlines in the ’80s with a string of highly-publicized and mostly overpriced U.S. investments, face the same dreary reality and may be forced to sell or restructure, analysts say.


″When you’re under water, you can only hold your breath for so long,″ said Daniel Schwartz, a New York investment banker and publisher of the Japan M&A Reporter, which tracks Japanese purchases.

The value of Japanese acquisitions in the United States fell from $11.9 billion in 1990 to $3.8 billion last year, Schwartz said.

And a Los Angeles accounting firm reported Thursday that Japanese investment in U.S. real estate fell last year to its lowest level since 1985 because of a credit crunch in Japan and lower U.S. property values.

Japanese investors bought $5.06 billion in U.S. real estate last year, down 61 percent from $13.06 billion in 1990, Kenneth Leventhal & Co. found.

During the heady 1980s Japanese buying spree that touched off a round of Japan bashing in the United States, the big deals included:

-Daiichi Real Estate Co.’s $94 million purchase of New York’s Tiffany Building in 1986. The company has been unable to sell the property.

-Mitsubishi Estate Co.’s $846 million purchase in 1989 of a controlling stake in New York’s Rockefeller Center.

-Sony Corp.’s $3.5 billion purchase of Columbia Pictures in 1989.

-Matsushita Electric Industrial Co.’s $6.1 billion takeover of MCA, Inc., in 1990.

In the case of Pebble Beach, Isutani bought the 5,300-acre coastal resort in September 1990 for $841 million from Texas oilman Marvin Davis. Most analysts said he overpaid for the property, valued then at about $600 million.

On Wednesday, Japanese-owned Lone Cypress Co. said it signed a letter of intent to buy Pebble Beach from Isutani for a reported $500 million. The deal is expected to be finalized by March 31.

Harry White, chief financial officer of Isutani’s Cosmo World Group, said Isutani still owes $430 million to Mitsubishi Trust and Banking Corp. out of a total $574 million loan he borrowed to help buy Pebble Beach.

″Isutani’s Cosmo World Group will absorb the loss,″ White said from his Los Angeles office.

But White acknowledged pressure from Japanese banks to liquidate, and analysts said that played a role in the Pebble Beach sale.

Bankers lost faith in Pebble Beach management, partly because of a public outcry after Isutani proposed selling private memberships at up to $740,000 to help pay his debt. The California Coastal Commission nixed the plan.

Executives at Sumitomo Bank Ltd., which provided financing for the Lone Cypress purchase of Pebble Beach, also pressured an Osaka-based trading company to cancel $670 million in promissory notes given to Isutani pending approval of the proposed membership plan.