Chinese real estate investors may switch focus: Panel

Chinese investors in US commercial property may switch their focus this year from buying newly constructed buildings to acquiring development projects, according to real estate executives.

"This is the year where we may start to see investors who are coming from China look at possibly purchasing apartment houses that are mostly fair market," said Darcy Stacom, a vice-chairman with the CBRE Group, a US-based commercial real estate brokerage. "Those can be redeveloped and put immediately into their distribution pipeline."

Stacom made her comments on Tuesday during a panel discussion about new approaches in real estate investment between China and the United States. It was held at the Bloomberg LP headquarters in Manhattan and was part of the China General Chamber of Commerce's (CGCC) 2015 Finance & Real Estate Forum.

Liu Erhfei, co-founder of Cindat Capital Management Ltd, a Hong Kong-based global real estate investment platform, Marty Burger, CEO of Silverstein Properties Inc, and William Dong, president of Shanghai Cura Investment Co, took part in the panel discussion.

"Chinese capital is buying income-producing properties, but they are also looking very closely at development opportunities," said Dong. "Chinese money is very willing to work with partners, and these partnerships are going to help."

Dong said that real estate activity in the Chinese mainland has been lagging so his company is looking for opportunities abroad. "For our company, being here in the US certainly says something," Dong said. "We've been active in China, but now we are looking outside of the home market. That's the biggest new idea for 2015 and onward."

In 2014, Chinese investors made nearly a quarter of all international commercial real estate acquisitions in New York, according to data from CBRE. Other popular cities for Chinese real estate investment included San Francisco, Los Angeles, Chicago and Boston.

Liu of Cindat Capital Management said real estate in New York City is preferred over second- and third-tier cities in the US because of the stability and liquidity of the market.

"The decision-making process is tough, but the trust factor between US and Chinese firms has changed in the last 20, 15, even 10 years," Liu said. "You have institutional and you have retail money, you have high net-worth individuals, middle class people, even EB-5 investors, so we are standing in front of a tidal wave of Chinese money flowing out of China and to other parts of the world."

Last year Cindat and Chicago-based Zeller Realty Group teamed up to buy a 65-story office building in America's third-largest city for $304 million.

Burger said there's still a "learning process" for Chinese real estate investors. "Investors have to get educated," he said. "Some have had to change their investments parameters. But these guys are getting smart; and we're seeing that evolution over the last four or five years."

Burger, who said he has made 24 trips to China in the last four years, said another issue to consider is the division of the decision-making process within Chinese firms making real estate plays in the US.

Stacom said: "It takes two to three years to reach a comfort level. That's going to be the biggest challenge to Chinese investment in New York and the US this year."

"The education parity has occurred," she said. "Some money is following technology, so they'll look at Seattle and Austin, or other markets like that where investors understand there's job growth. Many of these secondary markets are very industry-specific and some of those industries have faltered. Therefore, that's why the gateway cities continue to attract."

jackfreifelder@chinadailyusa.com