Welcome to Arcadia – The California Suburb Where Wealthy Chinese Criminals are Building Mansions to Stash Cash

Screen Shot 2014-10-16 at 1.53.00 PMThe city, population 57,600, projects that about 150 older homes—53 percent more than normal—will be torn down this year and replaced with mansions. The deals happen fast and are rarely listed publicly. Often, the first indication that a megahouse is coming next door is when the lawn turns brown. That means the neighbor has stopped watering and green construction netting is about to go up.

Arcadia is a concentrated version of what’s happening across the U.S. The Hurun Report, a magazine in Shanghai about China’s wealthy elite, estimates that almost two-thirds of the country’s millionaires have already emigrated or plan to do so.

– From the Bloomberg article: Why Are Chinese Millionaires Buying Mansions in an L.A. Suburb?

The surge in foreigners buying up U.S. real estate has been well documented in recent years. Of all this buying, no nation has demonstrated a bigger increase in purchases than China. In fact, it is estimated that 24% of all foreign purchases of domestic real estate this year have come from China, up 72% from last year. In my post from July, Chinese Purchases of U.S. Real Estate hit $22 Billion as The Bank of China Facilitates Money Laundering, I noted that:

In some California communities, 90% of real estate buyers are from China. Yes, 90%. Naturally, many of them are buying multi-million dollar homes in “all cash” transactions.

Well it appears that one of those communities is the 57,000 person Los Angeles suburb known as Arcadia. The suburb had a relatively insignificant Asian population of 4% in 1980, but it is now 59%. Of course, I could care less what the ethnic mix of any particular suburb is, but what does concern me is that a lot of the recent money coming in seems to be from questionable characters. The buyers are getting access to U.S. real estate via the EB-5 visa program, and of the 10,000 of these given away this year, 85% went to the Chinese. Oh, and it’s estimated some 20% of these home sit vacant. A great use of resources.

Here are some excerpts from Bloomberg’s expose:

Ornelas is an informal broker in Arcadia, Calif., a Los Angeles suburb at the foot of the San Gabriel mountains. He’s been keeping an eye out for the builder, an Asian man with a slight comb-over who goes by Mark. Ornelas has found two older homeowners who’ve finally agreed to sell their properties, and he knows that Mark, like all developers here, needs land on which to build mansions for an influx of rich clients from mainland China.

Ornelas rattles off addresses on a nearby street. “Three-eleven, that guy, he’s wack,” he says, shaking his head. “He wants 2.8.” He means million dollars. “And then 354, they want $2 million.”The lot is 17,000 square feet. “Seventeen for 2 mil?” Mark asks, incredulous.“I know,” Ornelas says. “They’re going crazy.”A year ago the property would have gone for $1.3 million, but Arcadia is booming. Residents have become used to postcards offering immediate, all-cash deals for their property and watching as 8,000-square-foot homes go up next door to their modest split levels. For buyers from mainland China, Arcadia offers excellent schools, large lots with lenient building codes, and a place to park their money beyond the reach of the Chinese government.

The city, population 57,600, projects that about 150 older homes—53 percent more than normal—will be torn down this year and replaced with mansions. The deals happen fast and are rarely listed publicly. Often, the first indication that a megahouse is coming next door is when the lawn turns brown. That means the neighbor has stopped watering and green construction netting is about to go up.

Arcadia is a concentrated version of what’s happening across the U.S. The Hurun Report, a magazine in Shanghai about China’s wealthy elite, estimates that almost two-thirds of the country’s millionaires have already emigrated or plan to do so.

The city’s Asian population grew from 4 percent in 1980 to 59 percent in 2010.

Smith says many of the newest buyers in Arcadia don’t speak English. “They’ve just come here,” he says. “They’re on that EB—what’s it called?” He means the EB-5 visas that the U.S. grants to foreigners who plow at least $500,000 into American development projects. Congress created the program in 1990 to spur investment, and demand for the visas has grown recently. This year, for the first time, the government gave away the annual allocation of 10,000 visas before the year was over, with Chinese nationals snapping up 85 percent. Brokers in the area say it’s the most common way buyers are coming to town. “Once they obtain residency, they want to bring their family over and get the United States education,” says real estate agent Ricky Seow. “They can start a new life in California.”

In late 2013, Cheng and her mother, Wang Jun, bought a 9,000-square-foot house with a pool and spa in Arcadia for $6.5 million. According to an L.A. property filing, Wang’s husband is Cheng Qingtao. He’s CEO of China Huayang Economic & Trade Group, one of the first state-owned companies set up by the central government, which still owns a majority stake. Heli’s two-story chateau-style home is only a few miles from one owned by her aunt, who’s married to Cheng’s older brother, Cheng Qingbo. Qingbo was the first private owner of railroads in China and, by 2013, was the country’s 257th-richest person, worth an estimated $1.06 billion, Hurun says. In June, Shanghai police arrested Qingbo for allegedly duping people into investments, including a project that, China Business News says, didn’t exist.

Yep, the guy gets cuffed in China, but here in America we welcome him with open arms and he gets to buy a mansions.

For most Arcadians, it would be hard to know if Heli owned the house next door. A member of one homeowners association estimates that about 20 percent of the new purchases sit empty, and for those who don’t speak Mandarin, language barriers have made it hard to share more than a wave with neighbors. For many sales, public records provide no way to understand who the new owners are. A recorded deed may show just an English transliteration of a buyer’s name, with no signature. Some public documents provide small clues: a second address in a luxury condo near Tiananmen Square; a seal if a document has been notarized at the U.S. Embassy in Guangzhou; a husband who relinquishes rights to the land to his wife; or a signature in Chinese characters.

A few miles south, another new house, this one with Tuscan styling and Moorish window treatments, sold last year to a woman named Jin Liping. Her husband, Du Jianming, is the owner of one of China’s largest private builders of steel structures. His company has built bridges in Shanghai and connecting railways on the Tibetan Plateau. His wife bought the 8,000-square-foot house in Arcadia for $4.8 million in September 2013, around the same time the couple faced financial pressures at home. They lost three lawsuits in China related to unpaid loans, but their home in California looks in peak condition, with little red ribbons tied around the topiary by the front door.

Another criminal, welcome with open arms in America. Must be nice.

A goldenrod-yellow house on South 6th Avenue belongs to Tao Weisheng and Du Xiaojuan, who develop homes and run hotels in Chongqing. Tao is known in China for collecting calligraphy and paintings—and for reportedly paying bribes to bureaucrats. According to state-run media, in 2004, Tao and a business partner paid a local official’s gambling debt at a Macau casino. The official had given them a land certificate they needed for a loan. In 2010 the court found the official guilty of taking a bribe and gave him a suspended death sentence. The prosecutor didn’t charge Tao and his partner. The homeowners or their representatives declined to comment or did not respond to interview requests.

Lately, groups of Chinese investors have pooled their money to buy Arcadian homes, which often aren’t occupied. More than 400 residents showed up at a community meeting with the police department this spring, in part concerned about a spate of burglaries targeting empty mansions. When there are leaks or other problems with a property, even the city struggles to identify who’s responsible. “Who do we contact? Where do we contact them?” says Jim Kasama, the community development administrator for the city’s building department. “Sometimes it’s not that easy.”

With so many homes vacant and language barriers prevalent, distrust is building. There are strange rumors—local officials on the take; bridal studios as fronts for massage parlors—and stranger truths. Just steps from the Arcadia police station, a local TV news reporter uncovered a hotel being used for birth tourism. A member of one homeowners association says a developer told the local board at various meetings that three separate homes he was building were all for his own family. When the board called him on it, he said his wife couldn’t decide which one she wanted.

Well sure, when you allow corrupt Chinese billionaires in, what do you think is going to happen? They’re not used to playing by the rules.

Neighborhood disputes are getting intense. Dong Chang, a local dermatologist who told the Rotary Club that he left Taiwan in the early 1970s with “two bags of rice and a frying pan,” is suing the developer building a mansion next door for cutting down an old oak tree on his property. He’s seeking about $280,000, saying the harm was “intentional, fraudulent, oppressive, malicious, and despicably done.” It’s trickier for those without accounts in Hong Kong. Chen Ping, a local broker, says there’s a common workaround. “We call it ‘head-count wiring,’ ” she says. Buyers line up other people—friends, family, or, if need be, paid strangers—to each transfer a share. “I once had a customer who bought a $1.9 million house in Arcadia who said, ‘Not a problem. I have more than enough head counts,’ ” Chen says. Many buyers have legitimate ways to wire the funds, says broker Imy Dulake, but “there is no way we can have this much cash coming in legally.”

What’s happening in Arcadia is very similar to what I highlighted about Manhattan real estate in yesterday’s post: Meet the Pied-à-Terre Levy – The Proposed Tax that Could Crush High End NYC Real Estate.

Between private equity, hedge fund and foreign oligarchs buying, I’m surprised a single American citizen has purchased a home in the past five years.

In Liberty,
Michael Krieger

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  1. And the kick of it, these newly minted millionaires are purchasing our country with our money. go figure. It is sad to watch our country go down the tubes.

  2. We are friends with a family in Idaho that moved here from Arcadia almost 10 years ago because of exactly this reason.

    • Sooo. your friends with bigots from Idaho? Love to see rednecks lose what they thought was their country after treating minorities like crap for decades. Bon voyage losers!

  3. See also Diamond Bar and Chino Hills.

    Chino Hills is also known for its Chinese ‘maternity hotels,’ where (presumably, rather well off) expecting Chinese women stay, in order to give birth on US soil.

  4. Seems that their money is bilingual : )

  5. Chinese crapitalist criminals let in by Yankee crapitalist criminals…….the two deserve each other, God Bless Americahahahaha!

  6. The Chinese authorities are lying when they state that mr Kuang had 203 of his workers amputated of their limbs and eaten alive by rats, he and his henchemens never eviscerated those women, it is all just fabricated video evidences.

    That he pleaded the 5th amendement shows he is in fact a supporter of Democracy and Rule fo Law in China.

    He is clearly the victim of political persecutions and should be welcomed as a full citizen into the land of the freedoms.

  7. This problem is happening in many american cities.Phoenix, Albuquerque, etc.. Where I live, the houses are selling the same week…and they do sit empty.

    My Australian relative tells me it is a huge problem in Sydney as well.
    I do not believe the issue is as clear as the article is suggesting. For example, I do understand buying homes in Australia because they do not have a real estate tax at all–the city or the county can never take it away from you!
    On the other hand, the US has terrible real estate laws as well many asset seizing schemes –but then again if you are a millionaire in the US no one will dare touching you’ll be treated as a God.

    I think there is a bigger plan in the works–money laundering seems too simple of an explanation.
    Good day!

  8. I agree. I couldn’t even afford the taxes on a $2 million house in California. Then again these are wealthy people, and being a dual national is a true statement of wealth. God Bless America, where the only color anyone who matters sees is green…

  9. That’s where we live! $/sqft is crazy on the comps lately! We’re thinking of moving before the Chinese demand dwindles.

  10. It is absolutely incredible that the amount of Chinese Buyers have increased by 74% year of year. After Blackstone and Colony bought billions in 2012/2013, the Chinese are coming in to take their place. And not to mention the 10 year visa being offered to Chinese will greatly help the statistics as well.

  11. You white journalists never stop surprising me. Who the hell are you to tell people what to do with their own money and property? If I was a millionaire it is none of your business what I do with property I buy. Why are you mad at Asians and not your white criminal overlords who let this happen?

    I see, but when its white people buying up stolen native american land its ok. Anybody else, waaaaaaaaaaaaaaaaaahhhhhh. Get a grip.

    • Michael Krieger

      First of all, you forgot to take your meds today, grab them next time before acting like an imbecile.

      Since you’ve never commented on this site before, it’s obvious you have no idea who I am. My mother is an immigrant from Chile and I am not xenophobic in the least. In fact, my last post on this site specifically celebrates Rep. Ted Lieu, a Taiwan born member of Congress.

      Second, you should take the time to look into the author before making stuff up. I am anti-criminal crony, certainly not anti-immigrant. We have enough of them here in America, and I spend 95% of my time writing about and critiquing them. We don’t need to open the floodgates to foreign criminals, we have enough of our own to deal with.

  12. A lot of people who bribery, fraud, and sell sex in order to get money, lives in LA now. American government should check those area for the other residents safety. Does their job make sense to buy such expensive house? I don’t want criminal live around me, and my kids go to school with those people’s kids!

  13. So lets see this “Head count”…its Kinda like A few Mexican families..that are going to be living in a Single mansion…Except that they are Chinese..? lolol

  14. The chinese oligarchs are moving in as the american oligarchs are moving out. And. in two months time the whole usa will be a battlefield. All property value goes to zero. What a waste.

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