Chinese Developers Build in America, but Look for Buyers at Home

SHANGHAI—In a low-slung building near an artsy riverfront area known as West Bund district, a group of more than 10 familiesgathered on Thanksgiving Day for a tutorial about the American holiday, complete with a golden-brown roasted turkey. This wasn’t a cooking class. Instead, the attendees were being sold new condos in the U.S. being built by Chinese developerGreenland Holding Group, coupled with a culinary and cultural lesson on the autumnal holiday. Greenland is in the process of building two large apartment projects, one in Los Angeles and the other New York, and is turning to its standard client base—Chinese investors—to help fill them up.

Commercial property development has long been a local sport in the U.S., dominated by local firms catering to local demand. Greenland’s savory sales pitch offers a glimpse at a nascent effort by Chinese developers to turn that model around, converting demand from China into Chinese-built condos an ocean away. Big Chinese development companies, including Greenland, Dalian Wanda Group and Oceanwide Holdings, are collectively planning billions of dollars of U.S. development, including Chicago’s third-tallest tower and a $5 billion apartment project in Brooklyn. Most of the large developers have ambitions one day to collect as much as 20% of their income from international markets such as the U.S. and England. The Chinese developers “are household names or brand names within China,” said Martin Polevoy, a lawyer at DLA Piper in New York who advises Chinese real-estate firms on U.S. property. “People trust themand they will sign on to one of their projects in the U.S.” The extent to which these developers are counting on Chinese buyers varies by project, and some rely almost exclusively on U.S. buyers. But in many projects Chinese make up a third or more of the buyers, particularly when condo units are priced competitively to cities like Shanghai, fetching up to $1.5 million to $2 million apiece, brokers say. Buyers out of China thus far account for about 40% of Greenland’s Los Angeles project, the company said, although it expects that percentage to fall as it continues building the project. Wanda is expecting foreign buyers—the bulk of which are Chinese—to buy about 30% of its 94-story, 406-unit condo and hotel project in Chicago, said James Losik, marketing director at Magellan Development Group, which is Wanda’s local development partner on the Chicago tower. Chinese investors are “particularly interested in the U.S.,” Mr. Losik said. The precise amount of Chinese-backed development under way in the U.S. is difficult to gauge because many planned projects are unannounced while others might never become a reality. But overall, Chinese purchases of U.S. commercial real estate have soared in the past few years as companies and wealthy individuals have been urged by the Chinese government to diversify around the globe. Chinese purchases of commercial property grew to about $5 billion through the third quarter of 2015, already a record that is up from $2.5 billion in all of 2014 and $1 billion in 2010, according to real-estate services firm JLL. Nowhere has the interest been more concentrated than inLos Angeles, where at least 10 Chinese developers have purchased large development sites, all within the last two years, according to JLL. The epicenter is downtown Los Angeles, which was long devoid of apartments, but has recently begun to bustle even after its office towers empty at5 p.m.

Just within the blocks surrounding the Staples Center arena, four developers are planning more than $3 billion worth of development, largely condos mixed with retail and hotel space. The largest and furthest along is Greenland’s Metropolis project, a collection ofthree residential towers and a hotel. Greenland has marketing suites for the building in a downtown Los Angeles high rise and in Shanghai, where an American flag is perched next to models of Metropolis and a $5 billion New York project named Pacific Park Brooklyn. A Greenland spokeswoman said thecompany is bullish given the “trend of people returning to the city, confidence in Greenland’s brand and quality,” and the central location of its Los Angeles project. The skeleton for the first Los Angeles tower is complete while the remaining pieces are all scheduled to be done by 2018. The rapid pace presents risks for Greenland and the other developers. High-rise condos are a relatively new product in downtown Los Angeles, and if the housing marketor foreign-exchange markets—either in Los Angeles or in China—dramatically change, the developers could be hit by losses. In China, the target market is the growing ranks of upper-middle-class and wealthy citizens who are looking for a place to invest outside of China or want a place to send their children to get a better education. Roy Guo, a student at Columbia University in New York, purchased a studio apartment at Greenland’s Brooklyn project for $600,000 and said he would like to buy another apartment atMetropolisif he had the money. “It’s near Staples Center and I’m a big fan of the Lakers,” said Mr. Guo, who is from Shanghai. “I have a global perspective, and the yuan’s depreciation also means it’s important for us to have some assets abroad. But I don’t mean to transfer all assets out ofChina.” In addition to lessons on turkey and stuffing, developers take other approaches to woo Chinese buyers, often inpageant-like events with celebrities. In August, Wanda held a sales event in Shanghai for its global projects including the Chicago tower, complete with a cameo by Spanish soccer club Atlético Madrid, in which Wanda owns a stake. Fans holding soccer jerseys pushed their way into the ballroom when the soccer players from the club streamed onstage. The Chinese developers might soon face more competition back home.New York-based Extell Development recently launched sales in China for a tower in lower Manhattan, while several other U.S.-based builders are eyeing a similar strategy. Rob McRitchie, a Los Angeles-based senior vice president at JLL, said the real-estate services company is starting a whole practice to advise U.S. developers on sales in China. “We’ll have a sales event that takes place over the weekend,” he said. “It’s a busy room, and they’re closing deals on the spot.” Write to Eliot Brown at eliot.brown@wsj.com and Esther Fung at esther.fung@wsj.com This article originally appeared on The Wall Street Journal.