An email sent to Tokyo Trust’s corporate headquarters for comment went unreturned. But in a statement about the purchase, firm CEO Minoru Machida said that the real estate industry in this country had appeal because of its “unparalleled transparency and liquidity, backed by the most vibrant economy in the world.”
For his part, Nathan of MCRE, which partnered with Tokyo Trust on both the SoHo and Westchester deals, explained that having some regional skin in the game is now key.
“At the end of the day, real estate is an extraordinarily local and hands-on business,” Nathan said, “and to execute properly and consistently with your goals, you need a local partner.”
How it all began
When former professor Taikichiro Mori founded his same-named real estate company in 1951, the economy was about to enter its long-running “Japanese miracle” stage. As the nation stockpiled wealth, courtesy of electronics companies such as Sony and other success stories, and officials relaxed regulations, investors began gobbling up properties, sending real estate prices soaring.
In one commonly shared statistic, the land around the Imperial Palace was at one time worth more than the entire state of California.
“A lot of firms started investing in segments of real estate markets that weren’t a part of their production chains,” said Cameron LaPoint, an assistant professor of finance at Yale’s business school who has studied the post-war period.
And the capital quickly jumped overseas. Although not all of it ended up in New York, non-financial business investment in real estate both in Japan and overseas, including New York, more than tripled over the course of the 1980s, from 2.5 trillion yen in 1980 to 7.1 trillion yen in 1991, according to LaPoint’s research, which used Development Bank of Japan data.
But inflation became rampant, forcing Japan’s government to raise interest rates and some developers to liquidate to service debt, LaPoint said. There also appear to have been some misguided expectations.
When the Mitsubishi Estate Co. bought that Rockefeller Center stake in 1989 for $846 million, office rents at the 22-acre Art Deco complex in Midtown were around $30 per square foot annually. Mitsubishi assumed it could jack up rents to $100 a square foot, according to news reports. But then a recession kicked in, deflating those dreams and forcing Mitsubishi to walk away from the property in 1995. A Tishman Speyer-led group ultimately took control. (MCRE’s Nathan worked on that deal on behalf of Tishman.)
The 1989 deal, which was shadowed by accusations that U.S. interests had sold out to a foreign power, saw Mitsubishi also take control of the high-rise office buildings 1221 and 1271 Sixth Ave., as well as the development firm Rockefeller Group, all of which Mitsubishi continues to own today.