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Chinese investors targeting mid-tier US real estate

Developers like China Vanke look to avoid the volatile luxury market

Managing director of Vanke Holdings USA Kai-yan Lee (Source: LinkedIn)
Managing director of Vanke Holdings USA Kai-yan Lee (Source: LinkedIn)

Chinese institutional investors, facing highly leveraged markets at home, are shifting their focus from the volatile luxury sector to the more stable middle market in the U.S.

Lower priced residential properties and rentals, student housing, senior-living centers and skilled nursing homes are all becoming more attractive to Chinese investors, the Wall Street Journal reported. In recent years, Chinese investors have taken on high-risk luxury developments in Manhattan. The U.S. arm of Shanghai Municipal Investment, for example, has made significant investments in the city in past year.

It partnered with Ceruzzi Properties to buy a development site at 520 Fifth Avenue,  and also bought a $300 million equity stake in Gary Barnett’s Central Park Tower development.

Chinese development giant China Vanke has also poured money into the city’s residential market. It has partnered with Slate Property Group  and Adam America Real Estate on three development deals, including the controversial Rivington House condominium conversion. It also holds a stake in RFR Realty’s condo tower at 100 East 53rd Street.

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But, according to the Journal, Chinese buyers are now thinking more strategically about the U.S. market, and that means shying away from the high-end property market.

Out of Vanke’s 14 U.S. projects, 10 are focused on the middle-tier condominium market, some of which have rental units. The firm said it prefers to focus on developing homes for consumers whose demand is “necessity driven.”

“These simple and enduring principles have helped us focus away from the luxury market and investor-centric projects that carry higher potential risk,” Kai-yan Lee, managing director of Vanke Holdings USA, told the newspaper.

The company lost $10 billion in market value this month, as investors sold off shares amid fears that government intervention could complicate the company’s takeover.

China is set to introduce new rules to curb capital flight. The State Council of the People’s Republic of China is expected to announce stricter controls over foreign investments exceeding $10 billion, and more than $1 billion for state-owned firms. [WSJ] — Miriam Hall