DTLA - The $1 billion Metropolis mega-project is experiencing a shakeup before it is complete. Developer Greenland USA, the American subsidiary of a Shanghai-based corporation, has put two of the complex’s four buildings on the market.
Greenland USA put the 350-room Hotel Indigo up for sale at the end of January. Approximately three weeks later it began marketing the largest of the three condominium towers, an uncompleted, 56-story skyscraper that will hold 736 condominiums.
The asking price of the buildings has not been publicly revealed. Greenland plans to hold on to the two condo buildings that have been finished, which together have 822 residential units.
In a statement to Los Angeles Downtown News, Greenland USA President and CEO Hu Gang said the move comes after the success of the first two buildings in Metropolis, which attracted interest from investors.
“The potential for any future sale, Hotel Indigo or Condo Tower 3, would be decided based on the ebb and flow of the real estate market and the strength of the offer,” Hu stated.
Brokerage firm Marcus & Millichap is handling inquiries for the hotel, while CBRE is marketing the residential tower.
Metropolis has a long history in Downtown. It was initially broached in 1987 by City Centre Development, but never broke ground. Another developer, IDS Real Estate Group, acquired the entitled project in 2005, and altered the plans as Downtown’s residential population increased. Greenland purchased the project for $150 million in early 2014 and began construction a few weeks later.
Downtown-based architecture firm Gensler designed the buildings that stand just east of the 110 Freeway, near L.A. live. The first part, a 38-story, 308-unit condo building, and the 18-floor Hotel Indigo, opened in 2017.
A second residential tower, which stands 40 stories tall and has 514 condos, has been completed but is not yet open, according to Greenland.
Greenland looking to sell some of its buildings is not unexpected, according to Downtown real estate and leasing experts, but observers did say the timing is unusual.
“The fact that Greenland put a condo tower for sale before it’s completed is pretty significant. You usually don’t see that,” said Michael Soto, research manager with the firm Transwestern.
Part of the issue is a change in China’s overseas investment policies, according to Dr. William Yu, an economist at the UCLA Anderson Forecast who specializes in the Chinese economy. In late 2016, the Chinese government, seeing its foreign currency reserves hit a low, stepped in to increase regulation on the flow of capital heading out of the country, often into real estate markets, Yu said. Many firms, he added, were borrowing from the Chinese government and leveraging that into development.
Soto said that, in general, Chinese companies have started to pull back on their overseas investments. Yu agreed.
“It’s reasonable to see Chinese investment in the U.S. reduce over the last year, but this is not an end to it,” Yu said.
Metropolis is one of several Chinese-owned or funded mega-projects in Downtown Los Angeles. Oceanwide is developing the $1 billion mixed-use Oceanwide Plaza at 1100 S. Figueroa St., across from Staples Center. Shenzen Hazens is working on a two-tower mixed-use project at 1020 S. Figueroa St., where the Luxe hotel now stands. An investment entity known as CORE is putting $290 million into the Frank Gehry-designed The Grand.
Steve Marcussen, executive director with the Downtown-based brokerage firm Cushman and Wakefield, expects there to be plenty of interest in the condo tower. He pointed to its central location, and proximity to office towers and L.A. Live as factors that could appeal to a buyer. He said that major capital and investment companies are “hungry” for this kind of investment opportunity, and believes one will step in to finish and open the building.
The sale of the hotel is expected, Marcussen said. He indicated that the Downtown hotel market is strong, and noted the Hotel Indigo’s positive reviews, and the reputation of InterContinental Hotels Group, which owns the Indigo brand.
Construction of the final tower will continue even with the building on the market, Hu said. It is expected to be complete in 2019.
© Los Angeles Downtown News 2018