Can influencers and college students save Greenland’s Metropolis?, The Real Deal Los Angeles reported 12/2/19.
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| Official rendering |
The number of condo buyers has diminished, given the decreasing appetite of overseas Chinese customers, and the difficulty getting money out. Moreover, downtown L.A. is overbuilt with luxury condos, with Metropolis units priced well above other units.
The article contains a brutal quote:
“The Metropolis development never made sense in the first place,” said Richard Green, director at the USC Lusk Center for Real Estate. “There is a mismatch between the product that is downtown and the demand.”
So Greenland has switched from condos to rentals in the third building, and tried to appeal to a different buyer pool: not just the "influencers" and college students of the headline, but also downtown residents perhaps interested in events at the Staples Center.
The location
Not quite clear to the outsider is that that section of "downtown Los Angeles" is not the same as Downtown Brooklyn or Lower Manhattan--it's far less walkable, with far fewer amenities within walking distance. Indeed, the 2015 press release stated:The location
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| 2018 photo, from the southeast |
Sitting conveniently between Los Angeles’ financial district to the north and entertainment district to the south, Metropolis will connect these two districts via a pedestrian-friendly retail thoroughfare.As I wrote after a visit in 2018:
The site, a former parking lot, is just east of a freeway, and not far north of the entertainment district that contains the Staples Center and L.A. Live. It's far less of a neighborhood than the Pacific Park site in Brooklyn.
Delays, but completion
As the article explains, the project was supposed to be finished in five years after construction started in February 2014. The Los Angeles Times reported 7/13/17:
As I observed in 2018, perhaps Greenland's speed also had to do with the velocity of money--using it until the spigot closed.
They're close to that planned schedule, with three towers built, and the fourth scheduled to be completed by the end of this year. (We'll see.) The new article notes that at least Greenland's gotten the project built, compared to other major Chinese developers in L.A.
Parallels in Brooklyn
U.S. developers would typically space out a big-scale project like Metropolis over several years to make sure the market could gradually absorb the new space, but Greenland moved as fast as it could to try to replicate the speed it is accustomed to building with in China.
As I observed in 2018, perhaps Greenland's speed also had to do with the velocity of money--using it until the spigot closed.
They're close to that planned schedule, with three towers built, and the fourth scheduled to be completed by the end of this year. (We'll see.) The new article notes that at least Greenland's gotten the project built, compared to other major Chinese developers in L.A.
Parallels in Brooklyn
Is there a parallel in Brooklyn?
Will Greenland, however bruised and marketing to other developers, get Pacific Park done? It has, in Brooklyn, been creative, leasing other building sites to the developers TF Cornerstone and The Brodsky Organization.
But it can't--for better or worse--sell more condos, since the available subsidies favor rentals.
In Los Angeles, it's tried to sell both completed and future towers. From the new article:
Will Greenland, however bruised and marketing to other developers, get Pacific Park done? It has, in Brooklyn, been creative, leasing other building sites to the developers TF Cornerstone and The Brodsky Organization.
But it can't--for better or worse--sell more condos, since the available subsidies favor rentals.
In Los Angeles, it's tried to sell both completed and future towers. From the new article:
Amid sluggish condo sales, Greenland put two of the four Metropolis towers up for sale last year. The firm sought $280 million for the Hotel Indigo, but the tower never sold and a spokesperson said it has been taken off the market. Greenland also tried to sell Metropolis III, the largest of the four towers at 685 units, at an undisclosed asking price, rumored to be $450 million. That too didn’t sell, and Greenland is projected to finish construction this month. Except instead of condos, it’s now slated to be a rental building.The problem is that rentals don't bring in as much revenue.
Funding
From The Real Deal:
Greenland appears to have funded most of the Metropolis project through bond issuances overseas, according to a review of financial statements by The Real Deal. Public filings show that the megaproject has cost $1.26 billion, about $260 million more than first projected.That's research I haven't done regarding Pacific Park, but not unreasonable.
For now, 75% of the 308 condos have sold in the first tower, completed in 2017, according to The Real Deal. But 25% of 518 condos in the second tower have been sold. That leaves 465 unsold units, with a median price of $885,000, suggesting perhaps more than $40 million in yet-unclaimed revenue.
Moving the units
Meanwhile, Metropolis has used three different brokerages to try to sell units. A blind quote:
Moving the units
Meanwhile, Metropolis has used three different brokerages to try to sell units. A blind quote:
Privately, agents who worked on the project accused Greenland of being unreasonable, and not understanding the downtown market.
“We would sell five or six of these and be really proud of ourselves, and they would turn around and say, ‘Why didn’t you sell 20?’” one agent said.
The article suggests that, however clever the new marketing, price will make the difference. Stay tuned for price cuts, or incentives.
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