The purchase of the $1 billion Metropolis project by China’s Greenland Group in 2013 was one of the early milestones in an outbound real estate investment wave that put the Shanghai-based developer onto a global stage, beside co-stars such as Dalian Wanda Group, HNA and Country Garden.
Now, Greenland is said to be looking for a buyer for the biggest piece of that $1 billion dream, as disappointing sales and a cut-off in capital outflows force the Chinese developer to pull back from its investments on the US west coast.
Dumping Half the Homes, Plus the Hotel
The company’s Greenland USA arm has put the 56-storey, 736-unit Tower 3 — representing nearly half the homes in the Metropolis project — up for sale for an undisclosed asking price, according to an account by CoStar. The real estate information provider cites a source familiar with the matter as saying that Greenland is seeking $450 million for the condo block.
The reported move comes just weeks after Greenland was said to be hawking the hotel portion of the 6.5-acre Metropolis development earlier this month, and may indicate that China’s sixth-largest property developer by sales is facing financial pressure in the US after investing in $8 billion in projects on the east and west coasts.
Greenland Tripped Up by Sales Slump
The Shanghai-based developer broke ground on Metropolis four years ago, after buying the site at Francisco and Eighth streets for around $150 million. The deal for the largest undeveloped site in the core business district of downtown Los Angeles marked Greenland’s first US investment.
Greenland has now reportedly tapped property consultancy CBRE Group to shop the still uncompleted Tower 3, which is the tallest and final building in the development. Metropolis features a total of three condo towers offering 1,500 units and a tower comprising the Hotel Indigo. Slated for completion in 2019, the project also includes 70,000 square feet of retail and restaurant space.
The CoStar report indicates that condo sales at Metropolis have slumped “dramatically” since September, at which time Greenland had sold about 80 percent of the roughly 500 units in Tower 1 and some units in Tower 2. Greenland fired the original brokerage, Douglas Elliman, that same month and hired boutique brokerage The Agency to sell the remaining condos.
Project Threatened by Surge in LA Condo Supply
Greenland’s marketing shake-up may have been related to an imminent wave of luxury condos slated to hit the downtown Los Angeles market, amid a surge of over 30,000 residential units projected to launch in the city over the next three years.
The company has also mulled converting most of the development’s planned condo units into rental apartments, which would be sold off to a multifamily operator after completion, according to reports.
Just weeks ago, Greenland USA hired brokerage Marcus and Millichap to market the 18-storey, 350-room Hotel Indigo with an asking price of $280 million, equating to $800,000 per room. A source cited by CoStar speculated that the developer may use the sale proceeds to finance the remainder of the Metropolis project.
The hotel operated by InterContinental Hotels Group officially opened last April.
Shanghai-Based Firm Stumbles in California
Greenland has been facing setbacks in its North American operations, where it has now pulled out of, sold off or put on the market five projects in the last 18 months including four developments in California. In August last year the developer disclosed that it had overdue loans of RMB 457.5 million yuan (then $69.2 million) on some of its domestic projects in China, where it was struggling to pay its bills.
Last October, a Greenland-led Chinese consortium was reported to be selling the $2 billion Landing at Oyster Point, a 42-acre biotech and office project in South San Francisco which hasn’t yet started construction.
The state-owned Chinese firm also withdrew from talks for a 1.9 million square foot mixed-use redevelopment project in the North Hollywood neighbourhood of Los Angeles last November, before paying the mandatory deposit.
Greenland may be faring better in New York City, where the company last month boosted its stake in the Pacific Place Brooklyn housing-led project from 70 to 95 percent. US partner Forest City Realty Trust reduced its stake to five percent in the long-delayed, $5 billion mega-project.
Greenland Dumps Projects, But Anbang Brought Up on Charges
In recent months, other high-profile Chinese investors including Anbang Insurance Group, Dalian Wanda Group and HNA Group have faced their own set of challenges after scooping up overseas real estate projects and trophy buildings. China’s insurance regulator this week took over Beijing-based Anbang, which famously bought New York’s Waldorf Astoria hotel in 2014, and indicted its former boss Wu Xiaohui for economic crimes.
Wanda is selling off projects in mainland China, the UK and Australia, as the company struggles financially following a global deal spree. And debt-addled mainland conglomerate HNA is scrambling to raise money and sell off properties in New York and Hong Kong as the Hainan-based firm backpedals on a $40 billion buying binge.