Just five years after entering the U.S. market, Shanghai-based Greenland Group is charged with completing one of the largest — and most contentious — development projects in New York history.
Greenland launched its subsidiary, Greenland USA, in 2013, and that same year bought a 70 percent stake in Pacific Park, a 22-acre mixed-use development in Prospect Heights, for a reported $200 million. Earlier this month, the company said it would increase its stake in the project, which it values at $4.6 billion, to 95 percent, allowing Forest City Realty Trust to further limit its exposure to development.
The move comes as many other Chinese companies pull back on their investments in the U.S., in part due to pressure from the Chinese government to limit the amount of capital flowing out of the country. Greenland is simultaneously working on two other large-scale projects in the U.S., Metropolis in Los Angeles and Oyster Point South
Sign up for China Watch for weekly emails on Chinese real estate investments.
San Francisco. The former, a $1 billion luxury condo-and-hotel complex, is slated for completion in 2019. Construction just started on the latter, which will feature residential, hotel and retail space throughout the 42-acre waterfront site.
“These large-scale projects are our expertise,” said Scott Solish, director of development at Greenland and a former executive at the New York City Economic Development Corporation. “We’re very bullish on the New York market.”
But its recent moves outside New York have been less encouraging. In November, the company pulled out of a 1.9 million square foot mixed-use project in North Hollywood. Greenland and Dallas-based developer Trammell Crow Co. were selected by the Los Angeles County Metropolitan Transportation Authority to develop a 15.6-acre site near the Red Line Metro. At the time, Greenland USA chief executive and president Gang Hu told CoStar that the company had decided to focus its efforts on getting the South San Francisco project underway. Representatives for Trammell didn’t return messages seeking comment. Greenland declined to comment on the decision to abandon that project.
Greenland may also be looking to exit the South San Francisco venture. The firm and three partners bought the Oyster Point site in 2016 for $171 million, but the company was reportedly in talks with Kilroy Realty Corp. to sell the first and second phases of the $2 billion project in late 2017. Greenland wouldn’t comment on these talks. Meanwhile, sales at Metropolis have been sluggish, leading Greenland to replace Douglas Elliman with L.A.-based brokerage the Agency.
At Pacific Park, the firm brought in Nest Seekers International’s Ryan Serhant to handle sales at 550 Vanderbilt. The building has seen some success with Chinese investors.
Greenland wouldn’t provide details on the status of either project.
“Traffic through the sales office is better than ever (with more than 40 visitors this past weekend), and we are seeing consistent offers and deals,” a Greenland spokesperson said on Tuesday, referring to 550 Vanderbilt.
Other people’s money
Greenland’s parent company may also be grappling with issues of leverage, according to an August report from Moody’s. The report noted that the company’s debt-to-capitalization rate is between 76 and 78 percent, and that’s not likely to change in the next few months. It warns that Greenland’s debt-fueled growth strategy has led to weak credit metrics, along with the volatility of its non-property businesses (which include energy, finance and auto dealerships). Still, the company reported $44.4 billion in debt at the end of June 2017, a slight decrease from the $44.6 billion reported at the same time last year. And the company reported a 16.6 percent year-over-year growth in revenue in the first half of 2017.
“Greenland Holding’s credit metrics mildly improved, but its debt leverage remains high for its rating,” Moody’s Franco Leung said in the report.
Other Chinese investors and developers such as HNA Group, Anbang Insurance Group and Fosun International have gotten into hot water with regulators for taking on too much debt. Late last year, Xinyuan Real Estate, which developed the Oosten, lost most of the key team running its U.S. development arm, Xin Development, and brought in Kuafu Properties to help manage its active projects.
What these companies have in common is that they are not owned by the Chinese government. Meanwhile, SMI USA — the U.S. arm of Shanghai Municipal Investment — recently invested $73 million for a majority stake in Toll Brothers’ 351-355 Broadway and has a $300 million equity investment in Extell Development’s Central Park Tower.
Much about the company’s future at Pacific Park remains unclear. Greenland still must meet the state’s deadline to build 2,250 units of affordable housing by 2025, of which less than half is complete. The distribution of these homes in the 11 remaining buildings has yet to been announced.
During a Wednesday meeting of the Atlantic Yards Community Development Corporation — a subsidiary of the Empire State Development Corporation — board members repeatedly asked how Greenland would take on a bigger responsibility at Pacific Park. They wanted to know how a 25 percent increase in ownership would translate to on-the-ground work. Ashley Cotton, who is leaving Forest City for a new company started by MaryAnne Gilmartin and the principals of L&L Development, noted that the core project team wouldn’t change. The new firm, L&L MAG, has a service agreement with Forest City to continue working on the development.
“The skills you need to do Pacific Park exists across the two companies,” Cotton said. “Your lives won’t change.”
It’s unclear how Greenland is financing its latest purchase, and officials at the company and Forest City are keeping mum about the value of the deal. Jerome Sanzo, executive director of Industrial & Commercial Bank of China, which has worked with Greenland, declined to comment beyond saying that the company has been “very successful in their development activities in the U.S.”
The Greenland Group was formed in 1992 and has a presence in nine countries. Its U.S. subsidiary has $8 billion in assets, according to its website, and 100 employees across its three offices. The Brooklyn office has roughly 30 people, and Solish noted that the company isn’t planning to go on a hiring spree anytime soon.
The increased stake in Pacific Park doesn’t necessarily mean that Greenland is looking to further expand in the U.S. market, according to one source familiar with the company’s thinking.
“I think that it means that they knew that Forest City was really no longer interested in development in Pacific Park,” he said. “Greenland is a developer. They were interested in building there, and they felt that they were already very pregnant, and they had to do this.”