Chinese Investor Buys Second Los Angeles Hotel for $160 Mil

A little known company from western China is quickly becoming a major player in the southern California hotel market after a subsidiary of Sichuan Xinglida Group closed on the purchase of the Los Angeles Airport Marriott for $160 million.

The purchase through Xinglida’s US subsidiary, XLD Group, was the second time that the Chinese real estate developer had bought a hotel in the US’ second largest city, and both properties have been purchased from the same buyer.

The deal is said to be the largest hotel sale of the year in Los Angeles county, and reconfirms the preference among Chinese buyers for hotel assets, as well as continuing the trend towards purchases in California’s gateway cities.

Maryland REIT Closes Second Deal with Chinese Investor

Xinglida, which is based in Chengdu, Sichuan province grew wealthy developing mixed-use property projects and department stores in western China, and now appears eager to deploy some of those earnings overseas.

According to a statement from Diamondrock REIT, which sold the hotel to Xinglida, the transaction came about after the Chinese firm made an inquiry about buying the 18-floor, 1004 room property just east of Los Angeles International airport.

In December last year XLD Group purchased the 17-storey Torrance Marriott South Bay hotel in Los Angeles from Maryland-based Diamondrock for $74 million.

For its part, the specialist hotel REIT seemed happy to have closed the deal. “We are pleased to announce the agreement to sell this noncore, airport hotel, illustrating our commitment to take advantage of an attractive transaction market,” Mark W. Brugger, president and CEO of DiamondRock, said in a statement.

DiamondRock said the $160 million price tag works out to a 6 percent capitalization rate, based on a $10.5 million net operating income for the 12-month period ending Sept. 30.

Xinglida is said to be planning extensive renovations to upgrade both of its Los Angeles hotel acquisitions.

Chinese Buying LA Hotels Becomes a Trend

During 2014 Chinese companies have invested heavily in hotels in cities around the world, in part to take advantage of a growing wave of travellers from the world’s most populous country. And Los Angeles seems to be a leading point of interest for purchase of these hospitality assets.

Just last month Shanghai’s Jin Jiang Group invested $1.49 billion to acquire France’s Louvre Hotel chain – Europe’s second largest budget hotel operator. Also in November, China’s Sunshine Insurance Group Corporation bought the Sheraton on the Park in Sydney, Australia for A$463 million (US$401 million) from Starwood Capital.

Also, during June this year, Chinese steel maker Kai Yuan Holdings agreed to buy an international hotel along Paris’ historic Champs-Elysee for 344.5 million euros ($468 million).

In Los Angeles, in addition to Xinglida’s two deals, Shenzhen Hazens Real Estate Group has also picked up two hotels, the most recent of which was the Luxe City Center Hotel near the Staples Center, which the Guangdong-based developer purchased in August for $105 million.

During December last year Hazens had acquired the 15-story, 802-room Sheraton Gateway LAX Hotel, near Los Angeles International Airport for $96 million.

California Continues to Draw Chinese Investors

And Chinese investors have not just been targetting California’s hotels. A study by real estate consultancy JLL in September this year found that Los Angeles then ranked second among US markets for Chinese real estate investment in 2014, having benefited from $780 million in China-sourced acquisitions. And the Bay Area has also attracted numerous Chinese buyers.

In August of this year Dalian Wanda, which recently completed the biggest property IPO of all time, bought a site in Beverly Hills for a $1.2 billion project, and in May 2014 a Chinese golf course developer bought the former Standard Oil Building at 225 Bush Street in San Francisco for $350 million.

While Chinese investors are no doubt starting to look deeper into other markets in the US and Europe where asset values have not yet ramped up as much, for now California, and particularly Los Angeles, seem to still be attractive destinations for Chinese capital.