Agreement for 49% Stake Signed : Identity of Investor in Riviera Club Disclosed

After months of secrecy, Marukin Shoji Ltd., a Japanese real estate company, emerged Friday as the mysterious investor in the Riviera Country Club, the landmark 168-acre golf and tennis resort in Pacific Palisades.

Noboru Watanabe, chairman of Marukin USA, signed a formal agreement to pay, as previously disclosed, $52.9 million for a 49% interest in Riviera Associates, a new partnership formed with Laaco Ltd., the club’s current owner. Laaco will retain the majority stake in the new partnership.

The Riviera is Marukin’s first venture outside of Japan and is the latest in about a dozen California golf courses that now have Japanese investors.

Frank G. Hathaway and his brother, Charles F. Hathaway, remain as the managing partners of the Riviera, which was founded by their grandfather, Frank A. Garbutt, in 1927. Laaco will continue to operate the Los Angeles Athletic Club and California Yacht Club. Proceeds will be distributed to Laaco’s 300 limited partners after the sale closes next month.

The Hathaways and Watanabe reiterated earlier assurances that the club would remain the same--no new fees or assessments and reasonable monthly dues for its more than 1,500 members. But they also said there would be some improvements and enhancement of the grounds. “We do not plan to bring in groups of non-members,” Frank Hathaway said.

The identity of Marukin has been one of the best kept secrets around town since Laaco first disclosed in May that it was selling the entire 61-year-old club to an unidentified Japanese firm for $108 million.

Uncertainty raised some fears among members that the new owner might change their venerable club, which was a favorite haunt in the 1920s for film stars Douglas Fairbanks, Mary Pickford and Errol Flynn. The Riviera, site of the annual Los Angeles Open Golf Tournament, is known to golfers around the world.

In correspondence with Riviera board members to assure them that the club would remain virtually unchanged, Marukin referred to itself as “the purchaser.” Even after Marukin scaled back purchase plans last month to a 49% interest, it requested its identity be kept anonymous. Marukin has a one-year option to purchase the rest of the Riviera. If it does not, Laaco would have the right to repurchase 100% ownership.

Keeping names private is routine during business negotiations in Japan, Watanabe said during an interview Friday at Laaco’s office. But he was a little surprised at all the publicity--some of it negative--that surrounded the buyer’s identity, Watanabe said through his interpreter, Steve Oto, a partner at the Los Angeles office of Touche Ross. Oto assisted with the transaction, along with Touche Ross’s Tokyo affiliate, Tohmatsu Awoki & Sanwa, Japan’s largest accounting company.

800-Year History

To help a create a more positive image, Marukin showed welcoming letters that it has received from Mayor Tom Bradley and Joey Rosenberg, chairman of the Riviera’s board.

Watanabe, 43, and his father, Kaneo Watanabe, 69, established Marukin in 1969. The elder Watanabe is chairman of the Tokyo parent and is known to be a big contributor to the Liberal Democratic Party in Japan.

The younger Watanabe said his family is a well-established family with a 800-year history in the Yamanashi area near Mount Fuji. His family originally operated a textile business in that area before developing its Tokyo properties.

Today, Marukin owns eight prime commercial office buildings in the Tokyo area and has assets of more than $1 billion. Watanabe said the recent dramatic rise in value of Tokyo properties has made it too expensive to develop new commercial projects in Tokyo.

So Marukin is diversifying and plans to develop exclusive resorts outside of Tokyo over the next five years in Atami, Fuji and Lake Biwa near Kyoto. The Riviera, which is well known to Japanese golfers, helps to add prestige to Marukin’s new venture, according to Watanabe.

Orderly Transition

The Hathaways and Watanabe said there are no plans now to provide reciprocal privileges between the proposed Japanese resorts and the Riviera.

Watanabe said the decision to buy only a minority interest was not triggered by the negative publicity. Instead, he said, it would provide for a more orderly transition period and an opportunity for Marukin to learn the country club business.

Although many have called the price high, Watanabe said it was “reasonable.” The company is expected to recoup part of its investment from revenues generated from its domestic resort operations.