Asian investors alter skyline of Los Angeles, enter retail businesses

Chinese homebuyers at a real estate exhibition for overseas projects. [Photo provided to China Daily]

Asian investment, including billions of dollars from China, is changing the skyline of downtown Los Angeles. Investors have begun to diversify away from low-risk properties and into sectors such as retail and development projects, expanding their search outside gateway cities.

Industry insiders discussed the trend in the booming Southern California real estate market at a panel discussion at the SELECT LA Investment Summit, an international trade event on Friday in Los Angeles that drew some 250 participants from 30 countries and regions.

The face of Los Angeles has changed dramatically in recent years, said Hilda Solis, a member of the Los Angeles County Board of Supervisors, in her keynote speech.

Chinese investment in US real estate accounted for 7 percent of the foreign total in 2015, a number that many industry observers, such as Todd Tydlaska, executive vice-president at commercial real estate company CBRE, and Bill Allen, CEO of the Los Angeles County Economic Development Corp, consider an underestimate.

It's difficult to get a handle on the size of Southern California real estate transactions by private companies and individuals from China, which might cause a misreading of the precise performance of Chinese direct investment and market penetration, said Christine Cooper, senior vice-president of the Institute for Applied Economics, affiliated with LAEDC.

According to a survey by CBRE, 28 percent of global investors choose the multifamily/residential segment as their preferred property sector, followed by office (24 percent), industrials/logistics (23 percent) and retail (17 percent).

Global investors are advised to widen their property searches to new areas, seeking lower-priced properties with higher returns, said Tydlaska, adding that inland US and midwestern states are seeing a growth in foreign investment.

Los Angeles, however, remains a preferred destination for foreign investment, especially for Chinese investors.

Since 2014, Chinese developers such as Shanghai-based Greenland Holding Group Co Ltd, Beijing-based China Oceanwide Holdings Group and Shenzhen Hazens Real Estate Group have made headlines with their multi-tower mega developments in downtown Los Angeles.

Greenland USA is constructing the first and second phases of its $1 billion, 195,090-square-meter Metropolis mega project in the South Park area of LA. The first phase, which includes the 18-story, 350-room Hotel Indigo and a 38-story condo tower, is scheduled to be completed this year.

Oceanwide broke ground on its $1 billion, 69,800-square-meter Oceanwide Plaza in March. The project has one 49-story tower and two 40-story towers, with 504 condominiums and 183 hotel rooms.

In 2014, Hazens spent $105 million to acquire the Luxe City Center Hotel at 1020 South Figueroa Street and Olympic Boulevard to construct three high-rises. The first phase of the project aims to create a 30-story hotel with 250 rooms and a 30-story condominium tower. The second phase will demolish the old hotel and raise a 42-condominium tower with 650 condos and 7,900 square meters of retail space on two floors.

Sonnet Hui, executive project director of Hazens Group US, said that the $700 million project represents Hazens' first ground-up development in the US. The company broke into the local market with a purchase of the 802-room Sheraton Hotel at Los Angeles International Airport in December 2013.

To improve competence, Chinese investors need faster decision-making and greater transparency around capital availability, said Tydlaska at CBRE.

"We will pool all our resources together," said Hui, adding that Hazens US will function as a traditional real estate developer to translate its success in China to Los Angeles.