Related Inks $950M Los Angeles JV With Unit of Blacklisted Chinese Builder

Related Companies has become the latest US real estate giant to tie up with a Chinese developer in order to kickstart a major project, after the company started by billionaire Stephen Ross signed a joint venture agreement with a unit of China Communications Construction Company (CCCC).

Related’s $950 million development across the street from the Walt Disney Theatre on Los Angeles’ Grand Avenue received final approval from city authorities last week. And on the same day that document was stamped, Related announced a $290 million investment from CCCG Overseas Real Estate, into the long-delayed project.

For state-run CCCC, the deal is the first US investment by a group rapidly building an overseas portfolio. It is also the latest victory for a company that was banned by the World Bank on fraud charges, but has benefited from strong support from China’s central government.

Mainland Company Provides Financial Muscle for LA Project

“We welcome CORE as our joint venture partner on Grand Avenue,” said Ken Himmell, CEO of Related Urban, in a statement. “They share our vision for the creation of a world-class destination and as a global Fortune 110 company, they boast not only a sterling financial record but also have great excitement for the development.”

The Frank Gehry-designed project includes a pair of towers which will provide 380-450 residential units, a 300-room Equinox-branded hotel, and a shopping complex. The two towers are part of the Grand Avenue Project, a public-private partnership involving city and county agencies which has been going on since 2007.

Representatives of CCCG had visited the US in mid-October to sign an agreement with Related regarding the Grand Avenue project, with a contract being signed between the two parties on October 13^th, according to a statement on CCCG’s website. Since that time, the decade-old project has received approvals from the LA Grand Avenue Authority, Los Angeles County, and other government bodies, culminating in last week’s City Council approval.

Related had reportedly gone looking for investment for the project after the budget jumped from $200 million to $950 million earlier this year. No details have been provided regarding the remainder of the capital stack, however, other US projects invested by Chinese firms have achieved success securing construction loans from mainland banks.

Blacklisted Mainland SOE Makes Global Push

While the Grand Avenue development is CCCC’s first US deal, the company and its various subsidiaries have been rapidly expanding their operations globally, particularly in infrastructure projects.

Despite being blacklisted by the World Bank following a 2009 fraud case on an infrastructure project in the Philippines, the company has been a major beneficiary of China’s growing interest in pushing its national champions onto the global stage. The construction group is currently the world’s fifth-largest general contractor, governed directly by China’s State-owned Asset Supervision and Administration Commission of the State Council.

After China’s government stepped in to fund the East Coast Rail Link in Malaysia, CCCC was awarded a key contract on the $13.1 billion project.

Following the recent warming of relations between the Philippines’ Duterte government and China, and as part of the $15-billion in investment projects signed during Duterte’s visit to China in October, CCCC subsidiaries have also won contracts to build an urban rail system in Manila and to renovate part of the Cebu International and Bulk Terminal project.

CCCC Goes for a US Joint Venture

Now expanding into the US, CCCC is one of a growing crowd of Chinese developers that are choosing to team up with American players on their home turf.

In mid-2016, Shanghai’s Greenland Group, China’s second-largest real estate developer by sales, joined hands with Trammell Crow, a unit of property services firm CBRE, to form a public-private venture with the LA authorities. They are to develop nearly 16 acres (6.5 hectares) around the North Hollywood station of the Red Line light rail system.

Another state-run developer, Gemdale, teamed up with US heavyweight Hines earlier this year on a Boston project that had been in the works since 1990. After the Houston-based firm had received support from the top ten mainland developer, the two companies began exploring the possibility of adding another 475 homes to the project at Boston’s South Station transportation complex.

While this appears to be Related’s first joint venture with a Chinese firm on US soil, the company had last year successfully raised $600 million in EB-5 funding, primarily from Chinese investors, for the first phase of its 1.2 million square metre Hudson Yards project in New York. Related has also been active in the Chinese real estate market, maintaining an office in Shanghai for many years.