Chinese developer buys major lot in downtown L.A.
A wave of Chinese investment continues to sweep through downtown Los Angeles as buyers from Shanghai have paid nearly $150 million for land near the 110 Freeway where a billion-dollar mixed-use complex is on the drawing board.
Chinese real estate developer Shanghai Greenland Group bought a sprawling parking lot next to the freeway north of 9th Street in a deal that closed Friday — Chinese New Year — real estate brokerage CBRE Group Inc. said.
The full city block known as Metropolis has been approved by the city for 1.65 million square feet of hotel, condominium, office and retail development on a block that links the financial district with L.A. Live and Staples Center.
It was the second major downtown land deal struck with Chinese money in barely a month, signaling L.A.’s appeal as a haven for investors looking to move money out of China. In late December, Oceanwide Real Estate Group bought land across Figueroa Street from Staples Center; it’s planning a five-star hotel, apartments and stores.
Major Chinese developers have been looking for large-scale commercial projects in so-called gateway cities on the East and West coasts, said real estate broker John Eichler of Cushman & Wakefield, who helped put together the Oceanwide deal. Cities such as L.A., San Francisco and New York are well-known to Chinese investors and have large Asian populations.
“You don’t see this in Chicago or Houston,†Eichler said.
The deals comes as state officials pursue more Chinese investment in California. In April, Gov. Jerry Brown went on a weeklong trade mission to promote the Golden State and forge economic partnerships.
“We’re going to facilitate billions of dollars of investments,†he said. “Not overnight, but over time.â€
Local officials have also been courting Chinese money. R. Rex Parris, the mayor of Lancaster, has taken numerous trips to China. That paid off last year when Chinese automaker Build Your Dreams opened a factory to produce electric buses in his Mojave Desert town.
Between 2000 and 2013, Chinese investors pumped $2.6 billion into California, according to New York policy research firm Rhodium Group.
Real estate is a particularly popular investment. In addition to commercial projects, Chinese buyers have snapped up houses and condos throughout the San Gabriel Valley and other parts of the Southland.
The recent arrival of Chinese developers in downtown Los Angeles means that two stalled high-profile projects planned by previous owners will spring back to life fairly rapidly, industry observers said.
Chinese developers want to move quickly, said Omer Ozden, managing partner at private equity firm Beijing Capital, who advises Chinese real estate developers. “There is a preference for shovel-ready deals.â€
Representatives of Greenland Group could not be reached for comment on their plans, but the company has invited local dignitaries to a groundbreaking ceremony at Metropolis in two weeks. The event may be primarily ceremonial, however, because the developers still need the city to approve their architectural designs before construction can begin.
Greenland Group is expected to build a 350-room hotel and 38-story condominium tower in the first phase. There is growing demand for for-sale housing in downtown L.A., and the units could also be marketed to mainland Chinese investors even before they are completed.
“Someone can buy a condo for what is considered to be not very expensive by Beijing, Hong Kong or Shanghai standards,†Ozden said.
Chinese investors have compelling reasons to bring some of their money to the U.S. Developers in China have a lot of cash on hand at a time when the country’s government is trying to slow land development to prevent a real estate bubble burst. Many wealthy Chinese individuals also have money they want to invest abroad because there are not many investment options in China and because they want to diversify their assets outside the country.
The Metropolis parcel was assembled in the late 1980s by developers who promised a “city within a city.†The office, hotel and retail project was designed by famed New York architect Michael Graves in his signature postmodern style that included covering the buildings in brightly colored terra cotta tiles.
In the mid-2000s the project was taken over by an affiliate of Los Angeles developer IDS Real Estate Group. Its plans for a 33-story condo tower were thwarted by a neighboring property owner’s lawsuit and then the economic downturn, said Patrick Spillane of IDS.
In recent years, the company secured city approvals for a new Metropolis design that could include four hotels, residential towers and offices. It would also have a 20-foot-wide sidewalk on Francisco Street lined with restaurants and shops to serve pedestrians walking between the office district and L.A. Live.
“We spent a tremendous amount of time creating a project that covers all the major downtown food groups,†Spillane said. “Now Greenland will move it forward.â€
Greenland Group was formed in 1992 to build green belts around Shanghai, he said, and has evolved into a Fortune Global 500 company with major developments in Sydney, Australia; London; and Seoul. In December, Greenland agreed to become the majority owner-developer of the $4-billion Atlantic Yards residential complex planned in Brooklyn, N.Y.
To buy Metropolis, Greenland Group beat out competitors from China, Singapore, Australia, Canada and the United States, said real estate broker Laurie Lustig-Bower of CBRE Group, who helped put together the deal.
Because the site is so visible from local freeways, development of Metropolis “will change the postcard picture of the downtown L.A. skyline,†she said. “We are seeing downtown going at a tremendous pace through a huge transformation.â€
More Chinese investment is likely to come and speed the process, Lustig-Bower said. “China may devalue its currency, so it behooves Chinese to move out as much money as they can now at its current value,†she said. “I think we’re on the front end of this wave.â€
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