TRD forum: China 2.0 is on its way

Panelists discuss foreign investment at TRD panel

TRD New York /
May.May 12, 2015 05:05 PM

A second wave of foreign investment is on its way from China to New York City, and real estate players here who want to stay on top of their game will have to adapt, panelists said at The Real Deal’s annual new development showcase.

Following a year of record capital flow, experts project that investment from China in NYC real estate could reach $50 billion over the next few years.

Addressing  a standing-room-only crowd at the Metropolitan Pavillion, panelists discussed how sources of capital will change as the volume of investment grows.

“At one time, if you wanted to go get money out of China, you’d go to Shanghai, Beijing and maybe Guangzhou. We hardly touch on the big cities right now.” EB-5 immigration attorney Mona Shah said, during a panel on foreign investment moderated by TRD editor-in-chief Stuart Elliott.

“It’s all second-tier cities, smaller cities,” she explained. “EB 5 has stretched out and the second- tier-city people do have the same kind of income or more.”

Sotheby’s International broker Nikki Field said that the first wave of buyers from China, who most likely worked with international business partners and sent their children overseas to be educated,  were used to Western business norms and negotiating styles.

Dealing with second-wave buyers, Field said, will require brokers here to become more acclimated to the Chinese style of longer negotiations and more due diligence.

“Most importantly, dealing with the second tier is, I believe, preparing the sellers and the sponsors… for this new type of buyer,” she said. “I think if you manage expectations on the sales side you’ll have a lot more success.”

Xinyuan Development president John Liang, who is currently working on the Oosten condo building in Williamsburg, said this new wave will bring a new kind of commercial investor as well. Chinese companies, he said, will move beyond being residential developers or investors to purchasing commercial properties.

“The third wave, which is just starting, they’re institutional investors,” he said “They’re more interested in commercial real estate: long-term, income generating and it can be leveraged by cash flow. This type of money right now is looking for opportunities here in the U.S.”

There could be some road bumps, though. U.S. Immigration Fund President Nicholas Mastroianni, who helps arrange EB-5 financing, said that recent moves by the Chinese government, such as the recent crackdown on corruption, could affect the flow of cash out of the country.

“The government has changed its philosophy a few times over the last five or six years, and every time it does that, it affects the market.” he said. “It affects the mentality, because a lot of the investors are government officials or work for state-owned companies, and as the government cracks down on these officials it absolutely affects the market tremendously.”

Related Articles

Larry Silverstein unplugged: Developer talks potentially building 2 World Trade Center on spec, Hudson Yards

Larry Silverstein unplugged: Developer talks potentially building 2 World Trade Center on spec, Hudson Yards

State of the market

State of the market: Real estate execs talk demand, pricing and more at TRD showcase

SLIDESHOW: Developers grapple with a changed environment while startups look toward an uncertain future at TRD forum

SLIDESHOW: Developers grapple with a changed environment while startups look toward an uncertain future at TRD forum

From left: The Real Deal's Jill Noonan, L&M CEO Ron Moelis and Slate Principal David Schwartz

Moelis, Schwartz talk up the steady upside to affordable development, and the “amazing” NYCHA real estate

Zach Aarons, co-founder of MetaProp, and E.B. Solomont, senior reporter at The Real Deal (Credit: Emily Assiran)

New York real estate’s tough talk is like “fresh air” for proptech entrepreneurs

From left: Industrious CEO Jamie Hodari, Common CEO Brad Hargeaves, Cushman & Wakefield's Global Brokerage chairman Bruce Mosler and Newmark Group CEO Barry Gosin (Credit: Emily Assiran)

Even with an economic downturn looming, the flex-space industry will grow explosively: TRD forum panelists

From left to right: Elizabeth Ann Stribling-Kivlan (president of Stribling & Associates), developer Michael Shvo, MaryAnne Gilmartin (CEO of L&L Mag), Vishaan Chakrabarti (founder of PAU Studio) (Credit: Emily Assiran)

Developers and brokerage heads riff on Stribling sale, condo pricing and myths about Billionaires’ Row at TRD forum

RXR Realty's Scott Rechler and CBRE's MaryAnn Tighe (Credit: Emily Assiran)

Rechler and Tighe on the future of CRE and city politics