The first day of The Real Deal’s Shanghai development showcase featured four packed panels on how Chinese investment in American real estate is changing on both sides of the deal.
Locals curious to get the inside scoop on how to make property plays stateside kicked off the day with a discussion on how the Chinese government’s capital controls are affecting the outflow of money to the U.S (read the full story here). Developers including Christopher Wein and Sharif El-Gamal registered positive notes about how those new restrictions were not going to kill Chinese investment anytime soon. “Any monetary or policy changes that occur are short-term changes, not long-term changes,” Wein said.
The EB-5 visa program was the subject of the second featured panel talk, with U.S. Immigration Fund’s Nicholas Mastroianni giving a rundown on the legislative threats to EB-5 and the likely reforms coming down the pipe. He tried to make the case that the US government should treat EB-5 as a job creation program instead of an investment vehicle for rural and underserved communities, and pointed to the fact that the overwhelming majority of Chinese EB-5 investors choose to put their money in high-end urban projects.
“You can choose the Marriott Hotel in Springfield, Illinois… or are you going to build a Times Square hotel built by a 200 million dollar company?” he said.
Two afternoon panels presented an opportunity to riff on which markets outside of New York are on the up and up. Jack Portman, chairman of Portman Holdings, heralded what he called “1.5 cities” that are growing, like Charlotte, Denver and San Diego. Daniel Hedaya, CEO of Ankor Management, pitched Chicago to investors looking for reasonable price points. At a separate panel, Marcus and Millichap’s JD Parker also touted the Carolinas.
As for new trends in Chinese real estate investment, student housing seems to have caught on. While Chinese investors have largely steered clear of the American multifamily rental market, dorm projects have caught their attention. DMG Investment’s Jacky He spoke about his company’s recent student housing venture in Albany. “Chinese understand the demand for student housing since they send so many students over,” he said.
The specter of President Trump cast itself over all of the day’s discussions, with the general consensus being that the new administration had yet to impact Chinese investment in the U.S. in any measurable way. Greenland USA CEO Gang Hu said the president’s upcoming trip to China was only good news for the future of Chinese-American business relations. “Now we are at a significant moment,” he said. DMG’s He called the trip “a very good sign.”
For prospective investors enticed by the allure of condo development, some sounded alarms. El Gamal cautioned against getting involved in the current phase of the cycle due to the difficulty of procuring construction financing. “Don’t do it,” El-Gamal said, “Don’t break ground on a new project right now.”
And for prospective condo buyers, panelists said not to get carried away with discounts. “I’ve seen a lot of 8 percent off asks,” said Extell Development’s Anna Zarro. “It’s not a lucky number for us.”