LOS ANGELES -- Winston Yan stood atop the largest real estate project of its kind in downtown Los Angeles, a monstrous patchwork of glass and concrete next to Interstate 110, and marveled at the bustle of workers, construction vehicles and cranes 38 stories below.
The scope of development in this mixed-use project, called Metropolis, is unprecedented for Los Angeles but quite familiar to Yan. As an architect and executive for Chinese real estate giant Greenland, he's witnessed firsthand China's dramatic urbanization in recent decades.
"It reminds me of what's happening in Beijing and Shanghai," said Yan, chief technical officer for Greenland's U.S. subsidiary. "Now it's happening here."
Los Angeles real estate has long attracted foreign investment, including from Japan, Canada and South Korea. But no one is building from the ground up the way the Chinese are today.
Chinese developers such as Greenland, Oceanwide and Shenzhen Hazens are pouring billions into the neighborhood, adding thousands of new residential units in skyscrapers that will change the city's skyline. Since 2014, Chinese developers have been involved in at least seven of 18 land deals downtown in excess of $19 million, according to real estate firm Transwestern.
"When all these megaprojects are finished, they're going to have to reshoot the postcard picture of downtown LA," said Mark Tarczynski, executive vice president for Colliers International's Los Angeles office.
By investing in Los Angeles, the builders are staking downtown's revival closer to the Chinese economy. A sizable share of homebuyers for the new downtown developments are expected to come from China, where many in the middle and upper class are looking to the perceived safety of foreign real estate to diversify their wealth. That trend has been exacerbated by the uncertainty of China's slowing economy.
The building boom is something of a showcase for Chinese real estate companies, which are willing to pay a premium to establish themselves as global brands. The foray overseas has also demonstrated the many differences between building in both countries -- an experience both sides will need to learn from if the U.S. is to remain a prime destination for Chinese capital.
"The speed is so dramatically different in China," said Sonnet Hui, executive project director for Shenzhen Hazens, which is building a $700 million mixed-use project across from Staples Center. "There's a lot of planning and study here, whereas in China it's just 'Let's go, let's go.'"
Before the Chinese landed, things were going nowhere on one 6-acre site. Plans to develop the parcel, which had been a parking lot, were scuttled by one economic downturn after another.
Then in 2014, Shanghai's Greenland paid $150 million for the plot and announced plans to build a "city within a city" with about 70,000 square feet of retail space, an 18-story boutique hotel and 1,500 residential units in three condo towers, some with ocean views. They priced properties at $500,000 for the lowest end to $6.9 million for the premier penthouses.
When completed in 2018, the $1 billion project will require a total of 300,000 tons of concrete and 650,000 square feet of glass, much of it in Greenland's namesake color.
"They need a certain amount of scale to make it worth their while," said Laurie Lustig-Bower, executive vice president at CBRE and broker for the Metropolis land deal. "Of course, what we consider large is not relatively large to them coming from China."
When the chairman of Greenland came to visit Metropolis, it was the first time he didn't require a car to traverse one of his building sites, an executive told Tony Natsis, a partner at Allen Matkins and chairman of the law firm's real estate practice.
"Their ability to build on this scale is completely child's play to them," Natsis said.
Around the same time Greenland bought its site, Oceanwide Holdings, another Chinese real estate giant, paid $174.8 million for a 4.6-acre site across from Staples Center. The Beijing-based builder is in the early stages of another $1 billion mixed-use project, this one with nearly 170,000 square feet of retail space, a luxury hotel and two sleek condo towers that together will offer more than 500 residences.
The project is set to open by the end of 2018.
Across the street are plans for an almost equally extravagant mixed-use development on the current Luxe City Center Hotel site. Shenzhen Hazens is proposing razing the hotel for a pair of gleaming condo towers and a W Hotel steps away from the arena.
"Our chairman [Yan Fuer] is a big basketball fan and went to a game at Staples Center and saw the property and said 'I want that property,'" said Hui, the project's director.
Shenzhen Hazens paid $104 million for the 2.5-acre site. The $925.11 paid per square foot is the highest of any major land purchase in the area since 2014, according to Transwestern.
The next three highest prices per square foot in the last two years also belong to Chinese buyers. The Greenland, Oceanwide and Shenzhen Hazens developments represent three of the four most expensive land deals downtown, and they highlight the Chinese appetite for splashy and ambitious projects.
"The Chinese can come in with a lot of money and execute deals quickly," said Michael Soto, an analyst for Transwestern.
Other smaller Chinese projects in the works include a 35-story condo proposed by Shanghai Construction Group, a 28-story condo from Fulton Street Ventures and City Century's 37- and 22-story condo towers.
Chinese developers can afford to outbid the competition in markets like Los Angeles because they are willing to wait longer than most to reap returns and can rely on both local and Chinese-based homebuyers to scoop up their condos. It's also advantageous to move capital overseas to hedge against inflation and a weakening Chinese renminbi.
"They look at risk a lot differently because of these factors that relate to what's going on in China and what's going on with their currency," said Tarczynski of Colliers International.
Business on 09/09/2016