Gemdale Properties, one of China’s largest real estate developers, ventured overseas for the second time this week when it entered into a joint venture for a $125 million mixed-use project in Hollywood, California.
Gemdale Properties and Investments, a US-based subsidiary of Shanghai-listed Gemdale Corporation, will be working on the six-storey residential, office and retail complex along Hollywood’s Western Avenue, near Sunset Boulevard, with local Los Angeles builder, LaTerra Development, according to a joint statement by the two companies.
A slowdown in China’s real estate market, combined with the recent devaluation of the Chinese yuan against the dollar, has helped to drive investment by Chinese developers and institutions into US real estate to over $3 billion this year.
Despite the overall increase in Chinese cross-border deals, Gemdale’s entry into the Hollywood project helps break a nearly year-long drought for Los Angeles, as more mainland investors pursued deals in New York or northern California.
State-Owned Developer Brings Chinese Investment Back to LA
The approximate 4-acre mixed-use project, located at 1350 N. Western Avenue at Sunset Boulevard, is an infill development opportunity in a prime Hollywood location and is planned to be developed with office, retail and apartments, explained Charles Tourtellotte, President and CEO of LaTerra.
Gemdale chose to invest in the Los Angeles area after most other Chinese developers have headed to New York or northern California this year in search of opportunities. And the developer appears to have big plans for the city.
“This inaugural Los Angeles investment promises to be the first of many deals as we ramp up our capital investment and property development business in Los Angeles, a market that we are confident presents great value,” Gemdale USA’s CEO Jason Zhu.
But it could be more than just beaches and movies stars that make the southern California city attractive for a developer such as Gemdale.
“Downtown Hollywood has had almost no new residential or hotel development in the last 25 years,” said Scott Barrack, China Director with the Hollywood International Regional Center. Barrack, whose company is funding two hotel projects in the Hollywood area added that, “Besides have a brand that appeals to Chinese homebuyers, like downtown Los Angeles, Hollywood is one of the last of America’s gateway cities that hasn’t already been priced out of the market.”
By choosing Hollywood for its project, Gemdale will at least be familiar with one of its neighbors. Billionaire Wang Jianlin’s Dalian Wanda is building its own Los Angeles project, a $1.2 billion residential and retail combination, along Wilshire Boulevard in Beverly Hills, after buying the site in August 2014.
Elsewhere in Los Angeles, Shanghai-based Greenland Group has already begun marketing apartments at its Metropolis project near the Staples Centre, and just up the street from there is Oceanwide Real Estate’s $200 million Figureroa Central project.
Is LA Back on the Shortlist?
Although there are a growing number of Chinese real estate projects in the Los Angeles area, Gemdale’s joint venture breaks a nearly year-long drought for mainland investments in America’s second-largest city.
According to data compiled by Mingtiandi, Gemdale’s Hollywood project would be the first Chinese real estate investment of more than $50 million in the Los Angeles area this year, after the city notched five such projects in 2014. By comparison, New York has attracted more than ten deals of over $50 million so far in 2015, London has six, and Sydney leads all cities globally with fourteen.
Despite the lack of large scale activity in Los Angeles, Chinese investors have been active in other parts of California this year. Among other deals, in January Oceanwide Holdings bought the First and Mission project in San Francisco for $296 million, and Wanxiang America joined with Hyatt heir John Pritzker’s Geolo Capital to invest $400 million in two northern California hotels during 2015 as well.
Gemdale’s Hollywood project is the second trip into California for the Chinese developer, after it entered into a joint venture last year to build a two-building commercial complex in San Francisco. Gemdale’s northern California project pairs it with Dallas-based Lincoln Property in building 428,000 square feet of A grade office space at 350 Bush Street in the city.
Note: This version of the post corrects a previous edition which stated that Gemdale’s Hollywood project was the company’s first overseas venture.