Arco, B of A Will Sell Twin Tower Complex in L.A. : Deal With U.S. Unit of Shuwa Co. in Japan Will Give Both Needed Cash

Arco and Bank of America announced Monday that they have agreed to sell the jointly owned Arco Plaza in downtown Los Angeles to the American subsidiary of Shuwa Co., a major Japanese commercial real estate firm.

Terms of the deal were not disclosed, but sources familiar with the bidding on the building said the asking price was about $650 million. If the sale closes in mid-September as expected, it will be the largest single real estate transaction ever in Southern California and the second largest in the state, surpassed only by the sale last September of B of A’s world headquarters building in San Francisco for $660 million.

The twin 52-story, granite-sheathed towers of Arco Plaza are a Los Angeles landmark and a point of reference for all other major downtown buildings. When opened in 1972, the towers were the tallest buildings in Southern California and the region’s most prestigious business address.

Both Arco and B of A said they will remain in the building as tenants. The details of their leases were not disclosed.

Both companies badly need the money from the building sale, Arco because of falling oil prices and an expensive restructuring program, B of A because of huge loan-related losses. The nation’s second-largest bank lost $640 million in the second quarter of this year and $338 million for all of last year, among the highest losses in U.S. banking history.

Arco said it expects the sale to bring it an after-tax gain of about $80 million, which will partially offset some of the costs of its restructuring. B of A said it hopes to see a pretax gain of about $200 million from the sale of its share in the building. The bank said $70 million to $90 million of the gain will appear in its third-quarter results, while the rest will be spread over the term of the lease.

The plaza, which occupies the block bounded by Flower, Figueroa, 5th and 6th streets, is owned by Flower Street Ltd., a 50-50 partnership of Arco and B of A. After the deal closes, Arco will reduce its occupancy in one of the towers by the end of 1986 to 20 floors from a high of 37 floors. B of A would not say what percentage of its tower it occupies.

The buyer is Shuwa Investments Corp., the American subsidiary of Shuwa Co. of Tokyo, described as one of Japan’s largest commercial landlords.

Y. Yamashita, vice chairman of Shuwa Investments’ board, declined to provide details of the sale or any information about the company. “It’s too early to speak about that. We are still negotiating,” he said. The company’s California headquarters are in Baldwin Park, and it owns a variety of commercial, industrial and residential properties in Southern California, including the 12-story office building at 800 Figueroa St. in downtown Los Angeles.

“They have an excellent reputation in the community,” said Robert A. Ortiz, senior vice president for brokerage services at Cushman Realty Corp. in Los Angeles. “They have the financial strength, the sophistication and the expertise to really polish that diamond.”

The plaza has 2.4 million square feet of leasable space and includes a two-story underground shopping mall, B of A’s three-story main Los Angeles branch, a large parking garage and 48 passenger elevators.

When it was completed in 1972, the project attracted blue-chip tenants including the Gibson, Dunn & Crutcher law firm, Citibank and the accounting firm of Peat, Marwick. All three have left for other, newer downtown locations, but the building retains a tenant roster of prestigious banks, accounting firms, consultants and law offices.

Arco and B of A announced their intent to sell the building a year ago, on the same day as the completion of the sale of B of A’s San Francisco headquarters to developer Walter H. Shorenstein.