Asian investors purchased $619 million worth of California real estate last year, thanks in large part to a flurry of major building sales in downtown L.A.
In the four years from 1993 to 1996, Asian investors have bought $377 million worth of downtown L.A. properties, most of those from Japanese owners, according to E & Y; Kenneth Leventhal Real Estate Group, which this week will release its first-ever survey of Asian investment in the United States.
Leventhal previously tracked the Japanese buying and selling of U.S. real estate on an annual basis, but this year it expanded its survey to include all of Asia.
The new report, a draft copy of which was provided to the Business Journal, noted that there was more than $6.3 billion of Asian investment in the United States over the four-year period. Hong Kong accounted for about 46 percent of the purchases, followed by Singapore with 22 percent.
California was the favored investment spot, attracting $1.4 billion, or 22 percent, over the four-year period. New York was second with 21 percent.
The Asian investment in downtown L.A. is noteworthy in that domestic buyers have largely ignored the area, said Dale Strickland, a senior manager at Kenneth Leventhal and a contributor to the report.
Strickland said Asian investors and U.S. opportunity funds typically look for the same things in real estate: deeply discounted properties in markets poised on the brink of a turnaround.
But despite their similarities, U.S. opportunity funds have avoided most downtown properties because of uncertainty about when the market will turn around, leaving the field wide open for Asians, said Strickland.
"Most opportunity funds have a five to seven year time horizon. They may feel downtown will take longer than that to recover. Asian investors seem to have a longer time line, so they're less afraid to go into downtown L.A.," said Strickland.
After downtown L.A., Beverly Hills has been the favorite investing ground for Asians in the last five years, according to the survey. Asians purchased $122 million in Beverly Hills property during that time, much of that following the sale of the Regent Beverly Wilshire to a group of Hong Kong investors for about $100 million last year.
Other hot markets for Asian buyers in L.A. include Bel Air, where recent purchases totaled $60 million, and Universal City, where purchases totaled $50 million.
In both cases, the large figures followed sales of major hotels: the Bel Air Hotel sold to the Sultan of Brunei for about $60 million and the Universal Hilton in Universal City sold to a Taiwanese buyer for between $45 million and $50 million.
Likewise, much of the Asian investment in downtown L.A. comes from hotels sales, including the Westin Bonaventure, the Biltmore and the Inter-Continental.
"A lot of these (Asian) buyers own hotels in their own countries, so they're familiar with the property type," Strickland said. "Also, hotels were initially among the most discounted properties. Even though we've had some appreciation in prices, hotels in L.A. are still among the most greatly discounted properties."
Strickland added that much of the hotel investment in L.A. has come from wealthy individuals in Hong Kong, Taiwan and China.
Meanwhile, Singaporeans, who are more institutional in their investing habits, have largely avoided L.A. because of the market's uncertainty. Koreans also have been less active in Los Angeles because they tend to favor residential real estate, which is currently weak in L.A.
Strickland said the rate of Asian investment in U.S. real estate has probably peaked, though it should continue to hold steady in the annual range of $3 billion to $5 billion over the next two to three years.
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