Browse Tag: china

Overseas Buyers Heating Up California Retail Property Market

Milbank's world headquarters, in One Chase Man...

Capital from China. It has to go somewhere — and plenty of it comes to the shores of the US. While it’s true that the average yuan making its way across the Pacific to the US ends up invested in US treasuries, an increasing portion of that capital flow is finding its way into commercial property.

Memorable deals marrying Chinese buyers and landmark US commercial properties include last year’s purchase of a 40% interest in General Motors’ midtown Manhattan office tower by Beijing real estate tycoon Zhang Xin for $1.4 billion. Also symbolic was Fosun International putting up $725 million for One Chase Manhattan Plaza.

But offices aren’t the only hot commodity in the eyes of Chinese real estate investors. Retail, too is attracting its share of suitors from across the Pacific.

Chinese equity partners getting into California’s malls is the premise of a recent Globe St. piece by the estimable Carrie Rossenfeld. In it, she interviews CJ Osbrink, a property marketer who has been busy getting pro formas out to an increasing number of interested investors from China lately:

GlobeSt.com: What impact are foreign buyers having on the retail investment market in Southern California?

Osbrink: Southern California has seen a huge pickup in foreign investor activity recently, and it is creating a much more competitive marketing process for well-located deals. For example, we just worked on a deal, the River at Rancho Mirage, that was sold to a local advisor with a mainland Chinese equity partner. This is the second property our team has sold to a foreign equity buyer in the last few months. They are very active and showing up on every one of our deals. A large driver of this activity is the increase of ultra-high-net-worth individuals looking to place their capital into more tangible investments, as well as improving macroeconomic and retail fundamentals in the US.

[…]

GlobeSt.com: What types of retail properties are foreign buyers most interested in, particularly in Orange County?

Osbrink: In Orange County, as in other parts of Southern California, they are looking for anything trophy oriented. These are pride-of-ownership assets that show very well and have a trophy appeal to them—something they can put on a brochure and show their investors, whether here or overseas. There is also very strong interest in generational, safe investments that they will hold for the long-term.  

Read the entire Globe St. article here.

 

 

Chinese Investment In US Commercial Real Estate On The Rise

asian-investment_0409Mainland China’s investors have hiked their rates of investment into US primary commercial real estate markets.  Eclipsing rates of investment by  Malaysia and Hong Kong for the first time, the Chinese mainland has for the first time sourced more capital for US CRE deals than its Asian neighbors and shows no signs of backing off.

Driving the trend in part is China’s insurance industry, which has experienced explosive growth in the 21st century. The risk business in China is one of the clearest examples of capitalism’s power to reshape expectations.  In 1999, China’s then $10 billion in life insurance premiums took a mere seven years to grow to $46 billion, and the industry is still considered in its infancy.  Fed by IPOs and joint ventures with foreign insurers (such JVs having been prevented by government regulation before China’s adoption of the World Trade Organization (WTO) frameworks), the actuarial arts are now an eye-popping feature of the Chinese economy.

In much the same way western insurance giants act as traditional institutional sources of investment capital for commercial real estate projects, China’s insurance companies are on the hunt for high-quality commercial property assets wherever they can find them.  Domestically, there are indicators that China’s best properties in the primary markets of Chongquing, Shanghai, Beijing and Tinajin are unavailable for this mountain of cash, and that fears of overbuilding in China’s secondary and tertiary real estate markets are leading China’s institutional investors to look for commercial property returns overseas.

Interactive Map

 To get a sense of the importance of Chinese capital to US real estate, numbers sourced from Realtor.Org and codified into an interactive map are worth a look: China figures in the top 5 of most US major state CRE markets:

Where Are Foreigners Buying Real Estate in the United States

 

Recent Examples Of Chinese Capital Funding US CRE Deals

From the Bronx to Chicago’s CBD to California, China’s US commercial real estate investment has picked up steam in 2013.  From Forbes:

Deep pocketed Chinese investment firms are out shopping for commercial real estate.

“Those in our network tend to look at commercial property in the $10 million to $25 million range,” said Lu.

Right now, Chinese investors see the U.S. as a bargain following the worst foreclosure crisis since the Great Depression.  In fact, some cities and towns across the country are cheaper than properties in Shanghai and Hong Kong.  Home prices in the U.S., coupled with economic uncertainties and tight regulations designed to curb a housing bubble in China, are driving record Chinese investments in the U.S. residential and commercial real estate markets, according to the Asia Society, a multinational think tank with offices throughout the U.S. and Asia Pacific.

For instance, Chinese commercial real estate purchases in the U.S. totaled over $3 billion in 2012, much of it in California.  The state is expected to see record investments by the Chinese in 2013, the Asia Society said.  Two sizable deals took place this year already.

China Vanke and Tishman Speyer signed a deal for a $620 million luxury condo project in San Francisco this winter. In April, another deal for a cool $1.5 billion was inked in Oakland between Zarsion and Signature Development Group.

In June, several big deals in New York City went down. Zhang Xin, CEO ofSoho China , joined forces with the wealthy Safra family (of Banco Safra fame) of Brazil to buy a stake in the General Motors GM +1.92% Building in Midtown, The New York Times reported on June 25. Dalian Wanda Group, another Chinese developer, is planning to build a greenfield luxury hotel in Manhattan.

The Big Five Chinese Insurance Companies

On the hunt for capital?  These firms are on the hunt for US commercial property pro formas and the returns they promise:

(Chart: South China Morning Post)