Construction workers in downtown Los Angeles are racing to finish Metropolis, the biggest mixed-use development on the West Coast.
When its three towers are completed sometime in 2018 – if all goes according to schedule – more than 1,500 condos will be added to Los Angeles' scarce housing market, but some of the buyers probably won’t be spending much time living there.
Other developers have tried for decades to raise enough financing to turn the six-acre Metropolis site into something other than parking lots. The only one to pull it off has been Greenland Holding Group, a Chinese state-owned real estate behemoth. Bankers and real estate lawyers say a big reason why it has succeeded where so many others have failed is because Greenland has a big advantage: a direct line to millions of potential buyers in mainland China.
“It’s relatively easy for them to bring to their Chinese customers' attention that they have this exciting project in Los Angeles," said Mike Margolis, a partner at the Century City-based law firm, Blank Rome, who frequently advises Chinese companies doing business in the U.S. "That’s a ready made market for them.”
"They have been very successful at selling to Chinese buyers," said Pin Tai, President of Cathay Bank.
Chinese buyers are attractive because about 70 percent of them pay all-cash, according to a 2015 National Association of Realtors survey.
Tai says it’s especially important to lock in those buyers first, because after the financial crisis, most banks require up to half a building to be under contract before they’ll approve a mortgage.
“It’s like building the foundation first," said Tai. "It’s low hanging fruit."
Less attractive is Chinese buyers' tendency to be absentee owners. The same National Association of Realtors survey showed only 39 percent of Chinese homebuyers plan to use their U.S. property as their primary residence. That means there are a lot of part-timers and investors looking for a place to park their assets, something increasingly common in Manhattan and London, which some have called safety deposit boxes in the sky.
“If they’re just absent investors and the units aren’t leased, I don’t know if that creates a problem in the community so much as a missed opportunity,” said Scott Bytof, who represents South Park on the Downtown Los Angeles Neighborhood Council. If a chunk of Metropolis' condos sit vacant, it means fewer new faces, and less foot traffic in the up-and-coming section of downtown.
Still, Bytof expects Metropolis to be a big boost for the area, especially since it also includes the 18-story Hotel Indigo as well as ground-level shops and restaurants. As for the people owning the condos above, he hopes they will inject additional money into the downtown economy.
“Hopefully they want to spend some time downtown, or even if they aren’t intending to, maybe they’ll come and see some things they like and want to spend some more time there,” said Bytof.
Greenland says buyers come from eight different countries
Metropolis’ website — with pictures of champagne and a digitally enhanced L.A. skyline — is in Mandarin, as well as English. Low-level studios start at around $600,000 while top floor two-bedrooms go for more than $2 million. Little expense has been spared.
"Everything you could really want is here," said Michael Altneu, vice president of marketing at Douglas Elliman Development Marketing, which is handling the building's listings. “There’s a yoga studio with a mediation garden and a dog park with a bathing station."
So how many condos are going to Chinese buyers? Altneu says it would violate Fair Housing rules to discuss the national origin of purchasers.
“There are so many people who are buying here, so from a purchaser standpoint, it’s really a huge mix of people," he said.
Greenland declined multiple interview requests, but in a written statement the company said buyers are from all over.
"As a global company, we regularly leverage our network of offices around the world to attract international buyers to our growing portfolio of properties," said Tami Scully, Metropolis' vice president of sales and marketing. "Metropolis, for example, already has buyers from eight different countries."
"We expect the residents of Metropolis to be as diverse as the rest of Los Angeles," added Scully.
Pin Tai, president of Cathay Bank, said though a significant portion will be from China.
“Their target customer is probably 30 percent Chinese investors,” said Tai.
He said he was told that figure by Greenland because his bank is writing the mortgages for some Metropolis buyers who can’t do all-cash. Tai says Greenland has had no trouble reaching that 30 percent, but he says the company also wants to balance that with buyers who are local, full-time residents.
Empty condos can bring property values down, said Dominic Ng, the chairman and CEO of East-West Bank.
“I always advise my bank clients to make sure 80 percent of the residents are going to stay there full-time, because what you don’t want to do is create a ghost town,” said Ng.
A Chinese investment boom in Southern California
Ng joined East-West two and a half decades ago. During that time, he’s seen Chinese investment in Southern California go from a trickle to a flood.
“It used to be like a few hundred million dollars a year, and now we’re talking about tens of billions coming in, so it’s dramatically different,” said Ng.
From just 2009 to 2014, investment into Los Angeles County from China doubled, according to the Los Angeles County Economic Development Corporation.
Ng said Metropolis is especially appealing because Greenland is a known quantity to Chinese nationals, and so is Los Angeles.
"They already have friends and family that live here that can guide them around," said Ng. "It’s so much more comfortable to come to Los Angeles when they know they literally do not have to speak English.”
Thanks to Metropolis, average condo prices in downtown Los Angeles hit a new high this fall: $803 a square foot, according to the Mark Company.
Developers are betting those prices will stay high; Metropolis is just the first of three mega-developments that will be built downtown in the next couple years, all owned by Chinese companies.
CORRECTION: A previous version of this story stated Dominic Ng founded East-West Bank. He joined the bank in 1991. It was founded in 1973. A previous version also said it would violate housing rules to track where buyers are from, rather than which countries they are from. KPCC regrets the errors.