Chinese home builder Landsea to develop 550-home project in Orange County
Chinese home builder Landsea plans to develop a sprawling 550-home community in Orange County, a sign that the Asian country’s slowing economy has done little to quell the interest of overseas developers in Southern California property.
Instead, the company, which already has projects in Simi Valley, the Bay Area and other states, has doubled down on the U.S market. It acquired 95 acres in Lake Forest this month as part of a plan to create a permanent U.S. business with homes largely marketed to American buyers.
The Orange County development is Landsea’s largest to date here and will provide the company with enough “economies of scale” to hire a robust in-house development team that can guide it toward its goal of becoming a top national builder, said John Ho, chief executive of the company’s U.S. subsidiary.
“We really want to grow in the United States and build a company with local people,” Ho said. “We haven’t sent anyone from China to work here.”
But to truly grow “you really need a [large] project to recruit.”
The Lake Forest development in the foothills of the Santa Ana Mountains is part of a larger master-planned community called Portola Center that eventually could have as many as 930 homes and 10,000 square feet of retail space.
Landsea said it plans to build about 550 of those homes — 313 single-family houses and about 240 town homes spread across five neighborhoods. It acquired the land from SunRanch Capital Partners, a partnership between developers Sunrise Co. and Baldwin & Sons.
Many of the hillside homes are being marketed as having views of Santa Catalina Island and will be among the largest to date for the company, with sizes range from 1,300 square feet to nearly 4,000 square feet. Prices are expected to range from the low $400,000s to the low $1 millions.
The first homes should go on sale in the second half of next year, and the entire project is expected to be finished in four years, Ho said.
Landsea is also planning a Simi Valley community, where its latest proposal to the city is for about 180 homes, most of which would be detached single-family houses. In Dublin, Calif., where sales have started for a community with 109 town homes priced from the mid-$600,000s, nearly a third are already spoken for, Ho said.
The company, which has more urban projects in New Jersey and Boston, also does limited marketing to Chinese buyers overseas.
Founded in 2001 in Nanjing, Landsea builds about 12,000 homes a year in mainland China. Last year, the company announced its arrival in the United States with a celebration at the Millennium Biltmore Hotel downtown and a pledge to plow $1 billion into the U.S. housing market.
The announcement marked one of the first entries by Chinese developers into the vast U.S. single-family-home industry. It drew attention because Chinese development firms have largely focused on big mixed-use projects in urban centers, such as Greenland Group’s $1-billion Metropolis development in downtown Los Angeles.
Landsea’s expansion, meanwhile, comes amid questions about China’s economy and whether the slowdown there will curb investment in U.S. real estate. In late summer, fears about slowing growth abroad spooked U.S. investors and sent the stock market tumbling.
But so far there’s been no evidence of a pullback from Chinese firms, said Mike Margolis, an attorney who works with Chinese developers. He said companies are executing “carefully designed” plans to diversify their assets, ones not easily derailed by events overseas.
“The outlook is positive,” Margolis said. “Nothing that has been reported about the Chinese economy has diminished that optimism and projection of growth in the U.S.”
Thilo Hanemann, an economist with the Rhodium Group, a research firm that tracks Chinese investment, said the slowdown abroad probably means more, not less, investment as companies increasingly look for more safety and better returns.
Since 2013, there has been nearly $3 billion worth of Chinese capital investment in California real estate, according to Rhodium. Those figures would account for residential developments such as Landsea’s, but not for Chinese nationals who are buying homes in places like the San Gabriel Valley, Hanemann said.
“The slowdown in the Chinese economy further reinforces the motive to diversify assets globally,” he said.
Indeed, that’s a major reason Landsea came to the United States. Unlike China’s previous real estate run-up, the current improvement in the U.S. market is sustainable, Ho said.
“We knew the economy would slow down, and we wanted to find other opportunities in the global market to expand,” he said.
Home sales have been on the rise this year, and price increases have eased to a 5% level that most economists say is more sustainable than the double-digit gains seen in previous years. Last month, the Southern California median price rose 5.6% from a year earlier to $435,000.
Some economists expect price gains to slow further next year because too few families can afford today’s prices.
Ho said the Southern California market has a solid future, given strong job growth and its status as a global market that’s more affordable than San Francisco and New York City.
The company’s focus will be on a U.S. clientele — not what Ho called the trend of Chinese buyers from overseas — to allow for long-term, sustainable growth (although the company does expect a good number of Chinese buyers given its domestic name recognition).
With that goal in mind, Landsea recently moved its U.S. headquarters from Pasadena to Irvine to more easily recruit talent in the home-building industry hub of Orange County.
“This is not ‘Let’s do one project and leave,’” Ho said. “It’s ‘Let’s do multiple projects and let’s invest for the future.’”
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