Arcadia’s in a McMansion Boom and It’s Completely Insane” was the headline five months ago in Curbed L.A., the real estate blog that tracks Southern California property sales and values. The city has made national news, possibly for the first time in its uneventful history — not because of mansionization, which is nothing new, but because of the way it has happened. And the boom continues, with just a slight slowdown.
The speed (and what some call stealth) with which the city has been transformed from a classic American ranch-house suburb into a mansionized mecca for Chinese multimillionaires is highly unusual. Prices paid for older homes have skyrocketed as developers and real estate agents literally troll the streets, looking for homes on desirable lots whose owners they can cold-call with an outrageously high cash offer, hoping to induce them to sell. Many who had no intention of selling cannot seem to resist. And who can blame them? Those who bought their homes years ago, for what now seems like a pittance, are being suddenly offered $2 million or more. In cash. They can buy a fine home in a nearby neighborhood and still put a profit of $1 million or more in the bank. The builder who buys the old home tears it down, erects a new mansion on the site and sells it for whatever the market will bear. A 2,500-square-foot Arcadia home at 1427 San Carlos Rd., for example, was built in 1955 and had never been updated by its owners. It sold for $2 million in December 2012, in an all-cash deal with a 14-day escrow. An 8,522-square-foot mansion was erected in its place and is now listed at $6,780,000.
“This house will definitely sell, probably to a Chinese buyer who will consider it a bargain,” says Phil Daniels of Coldwell Banker Residential Brokers in Arcadia. He represented the original homeowners and says they received “multiple offers from builders vying to acquire the property. We went with one who could perform with all cash and quick escrow,” Daniels says. He also represents the builder who is selling the new home. “That’s just not right,” says a (possibly envious) competing Realtor who does not want his name used and has no current listings in Arcadia. “How can you represent both sides in a transaction and do the best for both of them?” More on that subject later.
Realtors who spoke with Arroyo Monthly all agreed that, unless there is something tragically wrong with the home’s feng shui, a mansion like the one on San Carlos Road will probably find an all-cash buyer among the rising tide of super-rich Chinese who have chosen Arcadia as a place to park their money.
And in a December 2014 news video on the financial blog Zero Hedge, Arcadia-based ReMax Realtor Peggy Fong Chen tells a reporter that she sold $71 million worth of real estate in just the past year, mostly to mainland Chinese buyers and mostly for cash. Realtor Rudy L. Kusuma, on one of his Team NuVision Re/Max websites, claims to have hundreds of buyers-in-waiting for San Gabriel Valley homes; on another site, his calendar lists trips to Asia to recruit cash-burdened potential buyers. Such trips for Realtors aren’t unusual.
How these tycoons sneak the funds out of China, which has restrictions on such moves, is an unanswered question. But there are plenty of theories floating around in such publications as Bloomberg Business Week, which has been tracking the Arcadia situation. “Chinese nationals hold roughly $660 billion in personal wealth offshore, according to Boston Consulting Group, and the National Association of Realtors says $22 billion of that was spent in the past year acquiring U.S. homes. Arcadia has become a hotbed of the buying binge,” the publication reports.
But if the Chinese government finds a way to crack down on cash leaving the country, or if the Chinese economy suddenly tanks, the buying spree could end precipitously. That’s why so many homeowners are choosing to accept the generous offers and sell quickly, experts say.
Arcadia’s population of about 60,000 has gone from 4 percent Asian in 1980 to 59 percent in 2010, and has since exceeded even that percentage. Incorporated in 1903, its 11.1 square miles evolved from farm and ranch country into sylvan suburb, an area of simple, mostly modest-looking homes surrounded by lush lawns and populated by predominantly conservative white homeowners. Like the region in ancient Greece from which it took its name, Arcadia seemed to embody its Dictionary.com definition: “any real or imaginary place offering peace and simplicity for its residents.” The Literary Encyclopedia defines it as “a retreat from the complexities of sophisticated life.”
Simplicity has departed, as has peace. The streets are alive with the noise of demolition and construction, and the real estate transactions are said to be anything but simple. Realtors who spoke off the record say that deals happen fast, in secret, and many are not publicly listed. Some say they worry that older homeowners who really don’t want to sell are coerced into moving. Others talk of rumors that the Chinese government itself may be funding some of the purchases, and that groups of Chinese investors have formed to buy many of the Arcadia mansions, which remain uninhabited. At a community meeting with the Police Department last spring, Arcadia residents expressed concern about the number of burglaries at the many uninhabited new mega-homes. City officials agreed that they, too, are concerned and sometimes have problems finding the identity of the home’s owner when a crime or other problem has occurred.
Arcadia is now known in some circles as “the Chinese Beverly Hills,” because the new homes are not just palatial in size but equipped with marble halls, twirling staircases, coved ceilings and amenities equal to those found in only the showiest new construction in the country’s most upscale zip codes. (One Realtor confided that some of her Asian clients won’t house hunt in Arcadia even if affordable properties are available because they say they want their children raised in a “more multicultural environment.”) Arcadia has also been dubbed “Mistress City,” some Realtors say, because Chinese kajillionaires are apparently buying Arcadia homes for their inamoratas.
Of course, all these high prices and supposedly secret dealings leave most traditional buyers out in the cold. In response to another Curbed L.A. story on Arcadia’s metamorphosis, a reader commented: “I have been trying to buy a house in this area for almost a year now. We’re shopping in the $800K to 1 million range with more than 30 percent down and we get outbid every. single. time. by cash buyers. Who the **** has that kind of cash?… it is so frustrating.”
But the overall impact of mansionization has had positive effects on the city’s coffers and the many residents, both old and new, who remain. In the fiscal year ending last June, fees from building permits and development reached $7.9 million, a 72 percent increase from the previous year. The highly rated public Arcadia High School received a new $20 million performing arts center along with other updates, the city’s library is undergoing renovation to become state of the art and many shops, restaurants and businesses have benefited from the influx of new cash. Of course, Realtors with the right connections have had a financial heyday as well.
Jenny Liu has a historical perspective on Arcadia’s transformation. She is a co-owner of two real estate firms in the area, Re/Max Eite Realty in Alhambra and Premier Properties in Arcadia, San Marino and Pasadena. “It’s true that most transactions are all cash,” but there are lots of misperceptions floating around, she says. “Transactions aren’t hidden. Who buys a home is a matter of public record. Anyone can go down to the courthouse and get that information.” It’s also not true that most people are simply parking their money, she says. “There’s tremendous interest in Arcadia because of the climate, the excellent public schools, public transportation, public services and a wonderful ease of lifestyle, what I define as day-to-day living. It’s also an easier transition here for new immigrants who don’t speak English. We have restaurants, shops and many businesses geared toward those who speak Chinese, and many Mandarin-speaking public services. It’s a natural instinct to want to live where you feel comfortable, among people who are like you and with whom you can communicate.” As their children assimilate, she says, they may move into more diverse communities.
It’s all just cyclical, she says. Moneyed Chinese are only the latest in a long line of wealthy immigrant groups who have enriched the San Gabriel Valley. She remembers when Japanese and South Americans were the big spenders and says there’s already been a slowdown in sales to Chinese buyers. “I’m looking forward to seeing which currency will top the list next.”
Liu moved to Arcadia five years ago, she says, because she wanted her children, now 4 and 5, to attend Baldwin Stocker Elementary School. The transformation she’s witnessed since arriving has been “very, very quick,” and full of construction dust, but “it has changed the esthetic and increased the value of Arcadia overall. With that said, I can tell you that the house next to me and one across the street are vacant. In fact, five houses on our little street are unoccupied. I have no idea why.”
Coldwell Banker’s Phil Daniels, who represented the original seller of the San Carlos Road house and now represents the builder he sold it to, says there’s no secrecy or impropriety involved. “That’s the protocol now. When you secure a tear-down for a developer, you get the listing back. That’s why so many [Realtors] are trolling for transactions.”
Asked why he thinks the $6.8 million price tag is a bargain, he explains, “Over in Shanghai or Beijing, to buy a cramped, 2,000-square-foot house on a tiny, postage-stamp-size lot, they’d pay about $12 million. Here they get six bedrooms, six-and-a-half baths, an elevator, home theater, pool, outdoor kitchen and two interior kitchens — one American, the other for wok cooking. In other words, a spacious, well-built home with exceptional amenities, and for much less money. With the complexities of what’s going on over there, they feel their money is safer here.”