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Greenland Shopping Downtown LA's Hotel Indigo for Sale at $280M

Developer May Use Proceeds to Finance Rest of Metropolis Mega-Development
February 1, 2018
The developer of the Indigo Hotel located inside downtown Los Angeles’ $1 billion mega-development the Metropolis has hired a broker to shop the hotel to prospective buyers.

A subsidiary of Shanghai-based real estate developer Greenland Group has listed the 350-room hotel operated by InterContinental Hotels Group with Marcus and Millichap.

The development firm is also exploring converting the majority of the project's 1,500 luxury condos into apartments and then spinning them off to a multifamily operator when construction is completed next year, according to sources familiar with the discussions.

The 18-story Indigo Hotel, which opened in March, was the first piece of the 6.5-acre Metropolis project to reach completion. Other components include an additional three condominium towers and 70,000 square feet of high-end shopping and dining space.

Greenland and Marcus and Millichap are quietly targeting a small pool of deep-pocketed potential buyers with a sale offering memorandum for the hotel.

The company has a reported asking sales price of approximately $280 million, or $800,000 a room, according to sources who have been in talks about the project. That would set a new record price on a per-room basis for a downtown Los Angeles hotel.

The Ace Hotel holds downtown LA’s current hotel sales record at $566,000 a room, or $103 million total, when it sold in 2015 to Chesapeake Lodging Trust, according to CoStar data.

Of course, hotels in other parts of Los Angeles have sold for higher rates. Last year, the Jeremy West Hollywood, at 8490 W. Sunset Blvd., sold for $989,510 a room, or $283 million total, and the W Hollywood Hotel, at 6250 Hollywood Blvd., sold for $718,033 a room, or $219 million total.

Alan Reay, president at consulting firm Atlas Hospitality Group in Irvine, said selling the nine-month-old hotel may be a difficult - though not impossible - feat.

"Most buyers are going to want to look at least two years of historical financials," Reay said. "There’s a caveat you could add to that. You could say it’s brand new with an appraisal and offer projections, but when you are trying to get record prices that becomes far more difficult. You really don’t have any hotel financial data."

As to why Greenland may be planning to sell this part of the project so soon, a source familiar with the firm said company officials are likely looking to use proceeds from a potential sale to finance construction on the rest of the project.

Greenland is the second large Chinese investor and developer to attempt to sell a prominent Los Angeles property this month. Beijing conglomerate Dalian Wanda Group listed its One Beverly Hills entitled luxury hotel and condo project at 9900 Wilshire Blvd. for sale with Jones Lang LaSalle Inc.

"We definitely have seen a slow down over the past 12 months in Chinese foreign investment, whereas two years ago you had several mainland Chinese buyers looking around the market," said Michael Soto, research manager at Transwestern. "There is a level of uncertainty now that we haven’t seen in over five years."

Greenland purchased the Metropolis land at Francisco and Eighth streets for about $150 million in 2014. Later, L.A. City Council approved a generous tax break to build the $1 billion project that allowed the developer to keep about a quarter of all its taxes - about $39.2 million in total - generated from sales, occupancy, business and other sources.

As of last fall, Greenland had sold about 80 percent of the approximately 500 units in the first residential tower. Despite the apparent sales success, the developer fired its original brokerage, Douglas Elliman, last September and hired luxury brokerage the Agency to presell units in the second and third towers for prices ranging from $600,000 to more than $2 million, according to news reports. Calls to the Agency were not immediately returned.

With an onslaught of luxury condos expected to hit the Los Angeles market in the next 24 months, Greenland is reportedly now considering plans to convert those remaining unsold one- and two-bedroom units into apartment rentals and sell them to a multifamily operator when the project is completed, according to sources.

Colliers International Senior Vice President Adam Tischer said he has clients already scrambling to get in bids, even before an official sale listing.

"I’m personally working with several prospective buyers to underwrite and purchase one or more of the remaining residential towers for apartments," he said.

Marcus and Millichap declined to comment for this story. Greenland USA could not be reached.
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