Los Angeles has proven to be an appealing market for Asian commercial real estate investors. A 2016 report from Cushman & Wakefield noted that Los Angeles was the No. 3 market for Chinese investment, after New York and San Francisco, with about 7 percent of Chinese investment in U.S. real estate, totaling more than $1.5 billion.
Eddy Chao, CCIM, of Infinity Realty Advisors works almost exclusively with global investors. Chao and his company made headlines in 2014 when they handled the year's largest hotel deal: the sale of the Los Angeles Airport Marriott to a Chinese real estate developer for $160 million.
He recently discussed with Commercial Investment Real Estate how the influx of investment has helped change the city's commercial marketplace.
CIRE: Describe your work in Los Angeles - how you started and what you do now.
Chao: I started out in 1983 as a residential broker in the San Gabriel Valley of California. I learned about professional organizations such as CCIM, SIOR, and IREM in 1985 when I took courses from the Realty Institute, LLC, in San Bernardino, Calif.
After taking CI 101 in 1986, I realized commercial real estate is totally different from residential. The course opened up my eyes and led me into a different world. I continued with the rest of the courses and earned my CCIM designation in 1988.
During the late 1980s, I started my own syndication, buying small apartment buildings of between 20 to 30 units in the Los Angeles area. However, the timing was bad due to one of the worst U.S. down cycles. Most of the property values were far less than the existing mortgage debt, so I lost all the apartments in which I had syndicated.
On the other hand, since property values fell so much, I started working with several wealthy international investors, buying landmark Class A buildings in California, including office, retail, and hotels. This effort proved highly successful.
Today, I am one of the principals in the company, working with overseas investors on multifamily, hospitality, office, and retail, as well as overseeing more than $2 billion in assets for the ownership. I focus on the West Coast, with assets from northern California all the way down to San Diego, as well as properties in Las Vegas and Phoenix.
CIRE: How has the market changed in Los Angeles?
Chao: Los Angeles is a big city, so the change really depends on which area you're talking about. But overall, it has been transformed to a modern, fast-track city.
Downtown is a good example. Until the mid-1990s, there was nothing in downtown Los Angeles. People would ask where your office was, and when we said downtown, they'd say, “I don't want to go; it's not safe.”
But today, everybody goes downtown; you see new construction all over the city - developments for residential, commercial, and office. Lots of millennials have moved downtown.
They are young, with plenty of disposable income, which brings in retail business. They love to live in an urban setting; they enjoy the convenience. I think the trend will last for quite a while.
CIRE: How do you work with your international clients?
Chao: Our core business is assisting overseas investors who are interested in U.S. commercial real estate as part of their portfolio, to either provide stable cash flow or appreciation.
We act as their advisers to help them to identify their ultimate goal and help them to acquire the asset that matches their investment goals.
We work with major accounting firms to help our clients understand U.S. taxes; structure the proper entities and capital; and assist them on due diligence, secure financing, and close the transaction. In many cases, we also oversee the property as the asset manager after closing.
CIRE: What advice would you give to someone considering working with international clients?
Chao: It takes time. Exposure is important, so people get to know you. I get referrals from other professionals such as bankers, lawyers, accountants, and other Realtors.
Commercial real estate is broad, so you have to decide what you want to be and work on it - and then get lots of education.