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New York players host ‘road shows’ in China
Developers and investors wine and dine in pursuit of funding for local projects
Elaborate 12-course meals. Pop concerts. High-end hotels with sweeping views.
These are just some of the extravagances that New York real estate players use to lure in potential investors in China, as they look for backing for New York real estate projects.
These fundraising missions (so-called “road shows”) often include a string of events — from private lunches and business meetings to high-tech project presentations to banquet-style parties that take place in first-class hotels with lavish catering.
According to the brokers, bankers and real estate executives who attend them, they are essential when it comes to convincing Chinese investors to lend money or buy stakes in projects. And that’s true whether the funds sought are for an individual apartment, a major investment in a project or for EB-5 financing (the popular federal program which grants visas to foreigners who invest $500,000 in the U.S. economy, as long as that investment creates at least 10 jobs).
To be sure, these trips have been going on for some time. But they have increased recently amid the surge in Chinese interest in U.S. property.
The Durst Organization, for example, went on road shows in China in 2012 and 2013 to pitch a pair of projects: The 709-unit rental building at 625 West 57th Street known as the “pyramid,” and 855 Avenue of the Americas, a 375-unit rental atop offices and stores.
During the whirlwind trips, some of the firm’s events kicked off with local musicians performing short pop concerts. At the end, clipboard-wielding representatives from the firm signed up interested investors, according to a source who attended the event who joked that “it almost felt like a selling a timeshare.”
Durst raised $8 million in EB-5 funds for its West 57th Street ‘pyramid’ in a single summer weekend.
Meanwhile, Forest City Ratner sold a 70 percent stake in its massive mixed-used Atlantic Yards project, since renamed Pacific Park, to the Shanghai-based developer Greenland Holdings Group in late 2013 for $200 million.
Silverstein Properties has an office in Shanghai.
And with Chinese investment becoming increasingly important in New York, networking face-to-face is becoming much more crucial, driving more road shows.
“In New York, everybody knows everybody, and quite frankly, you don’t need to cultivate relationships,” said Kevin Swill, the chief operating officer of the Carlton Group, an investment firm that’s worked with developers like Howard Lorber, Donald Trump and Michael Shvo. “You have to go abroad. And when you’re there, hospitality is very important.”
Epic eating
Swill said on a recent trip to China he met with an institution investor who made a $140 million investment in a $500 million ground-up Manhattan condo project.
He said similar deals are in the works that were locked in during that same three-week trip to China, Singapore and South Korea, which The Real Deal cited in a series of stories last month. Along the way, he and two associates attended parties with private equity players, including one at the Four Seasons Hotel in Hong Kong with views of Victoria Harbor.
During the Carlton Group’s half-hour presentation, an open-bar even attended by about 30 people, steamed lobster on toast and crispy pork bellies with a black olive sauce were served. Swill said another of his pitches was for a $900 million development project in the New York area. The project’s developer is looking for about $300 million, Swills said. The investors snacking on the lobster were prime targets.
He’s planning another Asia road trip for this spring.
Min Chan, a lawyer, and a broker with City Connections Realty, said meeting in person clearly helps, but noted that you “can’t just breeze into town three times a year and expect to succeed.”
Min Chan
She said real estate presentations — often hosted by brokers based in China working on behalf of a New York player — are usually followed by epic meals.
These meals, she said, can have 12 courses, “and you can’t really tell if they are lunches or dinners” since they unfold over several hours.
Chan, who lives in New York but has family in China, noted that it’s not uncommon for those multi-course banquets to take place every night during a business trip to China.
“You have to be willing to drink a lot and try a lot of interesting food. It’s such a cultural shock for a lot of people, even for me, and I’m Chinese,” said Chan, who’s setting up an EB-5 regional center, which is a for-profit group that pools funds through the program. Such centers market development projects, essentially selling securities to interested investors.
While the alcohol flows freely, Chan will usually skip it in favor of fresh melon juice. “I’m terrified of going to these banquets,” she added. “But if you don’t go, you don’t give them face time.”
Meeting migrant agents
Of course, developers are also interested in pitching their finished New York products to buyers in China.
To that end, so-called “migrant agents” will often host presentations on behalf of New York developers in their offices. And, they also typically roll out the red carpets to do so.
While EB-5 is enormously popular, some have grown frustrated with the long time lapses that often accompany EB-5 investments, Chan said.
As a result of those concerns, Chan said she’s seen a slight drop-off in EB-5 interest. So some real estate brokers are going back to the basics and selling finished products: New York condos.
Indeed, a few months ago, an agent in Beijing who Chan works with transformed her office to accommodate private seminars.
Now high-net-worth buyers can relax in large white leather couches in front of a stage where presentations are given about the latest Midtown high-rises, before being wined and dined at a fancy restaurant. “It’s a very impressive set-up,” Chan said.