The Real Deal New York

TRD Shanghai dispatch: Chinese investors are about safety, not “high-octane” assets

Chiefs of Cindat, Swire discuss Chinese US real estate investment trends

September 15, 2015 08:15AM
By Hiten Samtani

The "U.S. Real Estate Market Overview" panel, with Jonathan Miller, Greg Peng, Mark Chu, Sean Mei and Stephen Owens

Jonathan Miller, Greg Peng, Mark Chu, Dan Kodsi, Sean Mei and Stephen Owens (Credit: Zak Agha)

Out of the top 10 cities for global Chinese real estate investment, six are in the United States, with New York City taking the top spot, industry experts said at The Real Deal’s U.S. Real Estate Showcase & Forum in Shanghai.

Sean Mei, founding partner of Partners Trust China, a real estate intelligence firm targeting Chinese investors, described New York, San Francisco, Los Angeles, Boston, Washington, D.C. and Chicago as “the big six” in terms of investor interest. The U.S. market’s “liquidity and transparency” are big draws for Chinese money, he said.

The Chinese have invested more than $30 billion in U.S. commercial real estate over the past five years, and experts predict that number to rise in the face of domestic uncertainty in the Chinese market. The panelists, moderated by Miller Samuel CEO Jonathan Miller, discussed investment trends, emerging markets and other factors that could affect Chinese activity.

“Chinese institutional capital looks for safe returns, not necessarily high-octane assets,” said Greg Peng, CEO of Cindat Capital, which manages U.S. real estate investments for asset manager China Cinda. Cinda owns a majority stake in Aby Rosen’s 100 East 53rd Street project, and Peng said Cindat is starting to look at condo, multifamily and hotel repositioning opportunities on the West Coast.

“We realize some of the markets are getting a little full,” Peng said. “In New York particularly, the market has had quite a run. Areas such as Pasadena and Downtown LA still have a lot of opportunities, at least until the elections.”

In South Florida, Chinese investment is concentrated in urban areas, said Stephen Owens, whose Hong-Kong based firm Swire Properties has a $3 billion, 2 million-square-foot-plus portfolio in the Miami area. Dan Kodsi, whose Royal Palm Companies is developing the Paramount Miami Worldcenter condo noted that Chinese buyers made up about 13 percent of the building’s initial sales.

Mark Chu, a managing director at Eastdil Secured, said that because of the search for yield, investors were moving from crowded markets like New York City into secondary markets such as Denver and Austin. Each group of buyers have different capital return requirements, he added, with sovereign wealth funds prioritizing stability and long-term leases while a firm such as Anbang Insurance Group, which bought the Waldorf Astoria for $1.95 billion in February, is interested in the potential of a lucrative condo conversion.