China’s Greenland Group is reportedly shopping the hotel within its flagship mixed-use project on the US west coast only 10 months after it opened, in the latest sign of overseas strains for the state-owned property firm.
Greenland USA, the company’s US unit, has tapped brokerage Marcus and Millichap to market the Hotel Indigo with an asking price of $280 million, or $800,000 per room, according to an account in CoStar, citing people with knowledge of the matter. A source speculated that the company may use the proceeds from the sale to finance the remainder of the Metropolis project, Greenland’s $1 billion, multi-phase development in downtown Los Angeles.
Operated by InterContinental Hotels Group, the 18-storey, 350-room hotel officially opened last April.
Greenland Changes Direction in LA
The overall Metropolis project is slated for completion in 2019 and also includes retail space and some 1,500 luxury condo across three towers of 38, 50 and 56 stories.
According to the report, Greenland USA is also mulling a plan to convert most of the project’s planned condos into rental apartments, which would be sold off to a multifamily operator once construction is wrapped up.
Greenland broke ground on the 6.5-acre Metropolis project in early 2014, after purchasing the land at Francisco and Eighth streets for around $150 million as its first real estate investment in the US. The Shanghai-based developer sold about 80 percent of the roughly 500 residential units in the first condo tower as of last fall, according to CoStar.
Greenland may have been dissatisfied with that sales performance, however, because the developer ditched the original brokerage in September and hired a new one, the Agency, to presell condos in the project’s second and third towers. Prices for the new units are said to range from $600,000 to over $2 million.
Swimming Against a Los Angeles Hotel Glut
Oversupply fears could be a factor in Greenland’s change of plans. Downtown Los Angeles faces an imminent glut of luxury condos, amid a wave of up to 30,000 new residential units projected to hit the city’s market over the next three years.
In 2016 Greenland had hinted that it would include the Los Angeles hostelry in a REIT that it was attempting to list in Singapore. That proposed listing failed to materialise.
The developer and Marcus and Millichap are now said to be approaching a small number of wealthy potential buyers for the Hotel Indigo, according to the CoStar account. If transacted at the asking price of $800,000 per room, the sale would set a new price-per-key record for a hotel in the city’s downtown.
Chinese Developer’s US Arm Shifts Focus to East Coast
The reported hotel offering suggests that Greenland could be facing financial pressure in the US, after investing in a total of $8 billion worth of real estate projects on the east and west coasts.
Like many Chinese property groups, Greenland is highly leveraged. A Moody’s report from last August pegged the company’s debt-to-capitalization rate at between 76 and 78 percent, although total debt eased slightly to $44.4 billion at the end of June 2017 from $44.6 billion the previous year.
Last October, a Greenland-led Chinese consortium was reported to be selling the Landing at Oyster Point, a 42-acre waterfront biotech and office project in South San Francisco which hasn’t yet broken ground.
According to the account, Los Angeles-based developer Kilroy Realty Corp agreed to buy the first and second phases, and secured the right of first offer for the third and fourth phases of the project, which the Chinese group picked up in August 2016. Kilroy last week bought an adjacent laboratory and office project from a real estate equity fund for $111 million.
Greenland also walked away from talks for a 1.9 million square foot mixed-use redevelopment project in North Hollywood, Los Angeles last November before paying the required deposit, leaving Dallas-based partner Trammell Crow to move ahead independently, according to a report.
Despite the California fumbles, the Chinese developer is ramping up its investment in its $5 billion mega-project in New York, Pacific Park Brooklyn. Greenland announced last month it was boosting its stake in the venture from 70 to 95 percent, with its US partner Forest City Reality largely stepping back from the housing-led development.