LITTLE TOKYO INC.: How Is Your $10 Billion Real Estate Portfolio?


Bjon kajiy JON KAJI

Over the past year, our firm has seen a definite uptick in real estate activity at all levels.

In Downtown Los Angeles and Little Tokyo specifically, new developments abound. Wall Street and foreign investors are flooding the marketplace, scooping up older hotels, offices and apartments and converting them into upscale boutique hotels, new apartments and high-tech creative office space.

Out in the suburbs, home values have attained pre-recession levels. Rental rates throughout California have tracked upwards, with tenants having to compete for available units.

What does this mean for Nikkei real estate owners and investors? How can you best navigate changes in the marketplace and “surf” the next wave?

If you are an owner, congratulations! Typically, individuals and families are slow to move or sell their real estate. A general Nikkei real estate owner is stereotypically risk-averse, owning their primary residence and any rental or income properties free and clear. Ownership is from 10 years and up, usually longer.

Yet, as our population ages, we see another trend where families may need help. As aging seniors require more health care support, there’s a trend towards moving into senior communities, assisted-living residences and nursing homes.

At the same time, a majority of the children have moved away from the West Los Angeles, Crenshaw, Gardena, Torrance, Monterey Park, San Gabriel and other historic Nikkei enclaves. We’re now seeing a new trend, that of homes that are no longer occupied, sitting unused, still full of old family possessions.

The term “mottainai” or “what a waste” comes to mind. I’m sure many of you know of situations like this. Maybe it’s your family’s situation right now!

What are the possible solutions for families in transition? Usually, the family has to decide whether it’s best to lease or sell the property in order to pay for ongoing health care costs. Deciding which course of action to take depends on a number of variables.

The real estate owned by Nikkei families is, in my observation, the most significant asset in the family’s estate. Nikkei families likely control more than $10 billion in Southern California real estate value (based on the 2010 U.S. Census figures of Japanese Americans in the region and a general, unscientific assumption of average net worth based on an typical single family residence in Los Angeles and Orange counties).

My challenge to our clients is how best to utilize their real estate and to consider making it a “performing asset,” that is, an income property that generates net revenue.

One of our clients, a widower living in the South Bay, was finding it increasingly difficult to maintain the 2,500-square-foot family home. He was still in good health, but living alone left him cut off from family members who lived outside of the area.

After consulting with the family members, the owner decided to sell the home and move in with his son’s family. In this instance, we were able to sell the home within one week. The owner was able to avoid the payment of long-term capital gains on the one-time sale of the personal residence.

A portion of the sale proceeds were used to purchase an income property that generates net income to more than cover the individual’s living expenses and health care costs. This made for a smooth transition for the owner, who now has a property management firm sending him a monthly report along with a direct deposit of rental income.

In our next segment, we’ll focus on what I call the “Nikkei Family, Inc.” and how families should treat their real estate holdings as a family business.

Jon Kaji is president of Kaji & Associates, a real estate firm based in Gardena. He is a member of the Board of Governors of the Japanese American National Museum and a member of the Board of Directors of the International Visitors Council of Los Angeles. Opinions expressed are not necessarily those of The Rafu Shimpo.



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