Anton Qiu’s Interview with – Part 2

Will Chinese Investors Now Seek Alternate Markets?

By: Natalie Dolce

SAN FRANCISCO—Asian investor profile has really been focused on New York and San Francisco. Now they may be willing to look more closely at alternate markets such as Chicago, Houston, Seattle, Denver and Boston or strong suburban markets. That is according to Anton Qiu, a principal and executive managing director of TRI Commercial/CORFAC International based in San Francisco, who spoke in depth with on the subject in this two-part Q&A series. Can you give us a sense of the scale of Chinese investment in US commercial property in recent years?

Anton Qiu: From January 2005 to March 2014, Chinese investors made direct acquisitions of $8.5 billion in U.S. commercial real estate. Of this amount, an enormous $5.8 billion was in the 15-month period from January 2013 to March 2014, according to Deloitte 2014 China Investment Report. Drilling down locally, what are some of the San Francisco investments made by Chinese buyers?

Qiu: *Vanke’s joint venture with Tishman Speyer (70/30) in SoMa to develop the 655-unit highrise luxury condo project Lumina at an estimated cost of $620 million.

*Beijing-based Zarison Group joint ventured with East Bay-based Signature Properties to create Brooklyn Basin in Oakland, which when complete calls for 3,100 homes, plus new commercial and retail development on the waterfront. The project is expected to take more than 10 years to build out and cost in excess $1.5 billion.

*China’s Gemdale Group is the financial backer for Lincoln Property’s ground-up development of the last remaining North Financial District Class A office building at 350 Bush Street.

*China’s Genzon Group (known as Kylli in the U.S.) bought the majority stake in 225 Bush Street, a 583,000-square-foot office building (the former Standard Oil Co. headquarters) which was valued at $350 million. What about smaller deals?

Qiu: Yes. Those are just the big deals. There have been many smaller property sales to Chinese buyers, many of whom are just high-net worth individuals buying local investment properties. For example, two years ago I was involved with a $12-million sale of a class B office building in San Jose. I represented a Chinese group out of Los Angeles in the acquisition. With China’s economy slowing, do you think the people managing its property investments here in the States will alter strategies?

Qiu: First and as most people know, there is a global search for yield with too much capital chasing too few investments of all asset classes. In the recent past Chinese investors have been willing to take on more risk; now they may be a little more cautious and instead of pure-yield plays, they may be looking for longer-term investments such as the Brooklyn Basin project in Oakland mentioned earlier. Additionally, the Asian investor profile has really been focused on New York and San Francisco. Now they may be willing to look more closely at alternate markets such as Chicago, Houston, Seattle, Denver and Boston or strong suburban markets. What’s behind all this Asian investment after all?

Qiu: The current market slow-down in US property markets may not be temporary; a real estate correction could occur given that capital markets have already begun a correction. Plus, the current market of super-high rents are not sustainable. However, I don’t see Chinese investments in US slowing down as there are waves upon waves of wealthy high net-worth individuals coming here and often for numerous reasons in addition to asset allocation and diversification previously mentioned, such as family needs—children’s education, immigration and quality of life. There are plenty of stories in recent years of Asians buying homes in and near Atherton to get their kids into local schools and have them ready for Stanford.

In addition, many wealthy Chinese are concerned about economic stability and uncertain how their own economy will continue to evolve from purely state-sponsored to some hybrid of capitalism with state controls or strong influence. The US is a safe haven for investment.

For Part 1 click here!

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