Asian Investors Complete Purchase of Inter-Continental

Asian investors have completed the previously reported purchase of the Inter-Continental Hotel in downtown Los Angeles for less than half what its Japanese owners spent to build it, according to people familiar with the deal, the latest example of the dramatic tumble in downtown hotel values.

The purchase comes at a time of gradual improvement in business for downtown Los Angeles hotels, said hotel industry analyst Bruce Baltin at PKF Consulting. Major downtown Los Angeles hotels ended 1996 with an average occupancy rate of 61%, far below rates in other downtown markets but up from 53% in 1995, according to PKF figures.

“The Inter-Continental is quite a coup for the buyers,” said Donald W. Wise, a hotel industry specialist for the real estate firm CB Commercial. “It’s a quality, upscale property.”

The expansion of the Los Angeles Convention Center, a resurgence in business travel and the return of international tour groups to downtown hotels have helped lift occupancy rates, Baltin said. Downtown should also benefit from the transfer of hotel ownership from cash-strapped investors to new owners free of heavy debt payments and able to invest in the properties.

The 435-room Inter-Continental was purchased for almost $50 million by California Hotel Acquisition Co., which includes Chinese investor Eddy Chao and Los Angeles investment manager Richard Alter. The sellers included Tobishima Development Corp., a Japanese real estate firm, and the Long Term Credit Bank of Japan, which held a substantial amount of debt on the property. The hotel reportedly cost about $125 million to build.

The planned purchase of the hotel was reported in The Times in early November. The closing of the deal was reported in the Wall Street Journal on Monday.

The boxy, 17-story building will continue to be managed by the Inter-Continental chain.

The Inter-Continental is one of several downtown properties that have experienced a shake-up in ownership and management in recent years:

* The historic Biltmore Hotel across from Pershing Square was sold in June for an estimated $60 million by Hong Hong-based Regal Hotels International Ltd. The sellers were a group of Japanese investors who paid an estimated $219 million for the property in 1989.

* The Westin Bonaventure, the area’s largest hotel, with more than 1,300 rooms, sold for an estimated $50 million to Taiwanese investors in 1995, five years after the owners defaulted on a $75-million mortgage held by the Equitable Life Assurance Society.