How does a deep-pocketed Chinese investor with an appetite for U.S. commercial real estate get the ball rolling? Some of the industry’s biggest players weighed in to answer that question, at The Real Deal’s U.S. Real Estate Showcase & Forum in Shanghai.
Rotem Rosen, CEO of the Sapir Organization, said there were three key steps for Chinese investors looking to debut on the U.S. scene.
“Find a trusted local partner, find the best local law and accounting firms, and do your research,” said Rosen, whose firm pulled off the largest single-asset investment sales deal in New York City history last month.
Hodges Ward Elliott’s Rick Rush, who brokered the $805 million sale of the New York Palace Hotel to Korean investor Lotte Group, said it was important for investors to educate themselves on the cap rates in different asset classes.
Notwithstanding deals such as Anbang’s $1.95 billion acquisition of the Waldorf Astoria, the Chinese in general are not trophy hunters, Rush said. Rather, they prioritize yield, and are typically looking for a 6 or 7 percent cap rate, which can be tough in cities like New York and Los Angeles.
“They’re moving to other markets [outside New York] and looking for all different kinds of assets,” such as select service hotels, he said.
The panel, moderated by TRD’s Managing Web Editor Hiten Samtani, touched upon trends in U.S. commercial real estate, looking at both the investment landscape and the growing role of Chinese money.
Bruce Mosler, chair of global brokerage at Cushman & Wakefield, said the Chinese were displaying a newfound “appetite to take on risk,” embracing development opportunities such as Fosun’s move to add 200,000 square feet of retail space beneath 28 Liberty Street.
Neal Sroka, who heads up the Sroka Worldwide Team at Douglas Elliman, said though the Chinese are “still enamored by condos,” many high-net-worth-individuals from China are looking to diversify with small office buildings acquisitions. He said his clients were showing interest in opportunities in submarkets such as the Bronx and Newark where one “can still get returns.”
Mosler described the new breed of Chinese buyer as “very savvy” about trends such as the emergence of tech firms on the New York scene, increased urbanization and the development of new neighborhoods such as the Far West Side, which has seen major EB-5 investment from China in projects such as Related Cos. Hudson Yards. Potential changes to EB-5 legislation and interest rate movements could affect Chinese investment, he added.
Sroka said China is a “country that’s run by young people now,” and said the bulk of Chinese investors he had met were in their 30s and had the pulse of the market.
“They’re really doing research and educating themselves, so brokers should have their facts straight,” he said.