O.C. Group Seeking to Gain Control of the Arco Plaza

A low-key Orange County investment group has launched an effort to win control of the landmark Arco Plaza in downtown Los Angeles from its Japanese owners.

San Juan Capistrano-based Kings Capital, a privately held firm controlled by real estate investor Kenneth A. Picerne, has purchased a portion of the debt on Arco Plaza and its twin 52-story skyscrapers, according to people familiar with the transaction. Industry observers say Picerne purchased the debt as part of a plan to put pressure on property owner Shuwa Investment Corp. to sell the nearly 2.5-million-square-foot complex it purchased for an estimated $650 million in 1986.

“I’m sure [Picerne] did it with the intention of controlling the property,” said one real estate executive with knowledge of debt purchase.

In a brief statement, Kings Capital said it had “recently concluded a significant transaction with Shuwa Investment Corp. and Shuwa Corp. involving numerous assets in Japan and also involving the Arco Plaza project in Los Angeles.”

Kings Capital officials were not available for further comment.

Executives at Shuwa Investment in Los Angeles could not be reached.

Kings Capital is one of a number of companies controlled by Picerne. He has been involved in previous deals that include the purchase of loans on distressed U.S. properties owned by Japanese investors, according to some Orange County real estate and investment observers. However, little is known about the firm’s holdings or its backers.

Arco Plaza has been on and off the market several times in recent years as Shuwa and other Japanese investors reduced their U.S. real estate holdings that were amassed during a buying boom in the late 1980s. Many of those properties now are worth a fraction of their purchase prices, and many Japanese investors are under pressure by lenders to sell the assets.

Shuwa has been able to attract some major tenants in recent months--such as the architecture firm Daniel Mann Johnson & Mendenhall--to Arco Plaza, which occupies an entire block at Fifth and Flower streets. However, about one-third of the office space is vacant, according to real estate data provider CoStar Group Inc.