Wednesday, December 9, 2015

Where Rich Chinese Are Stashing Their Cash: America’s Hotels and Strip Malls

(Source: WSJ) A small group of wealthy Chinese investors recently poured $10 million into a luxury condominium project in New York’s Westchester County. The redbrick building, set to open next year, will feature a pool and a roof deck offering sweeping views of the Hudson River. None of the people bothered to visit the site before plunking down their money.“ It was a relatively easy deal,” said Rick Singer, a New York real-estate investor who introduced the Chinese investors to the project’s developer. “It gave the Chinese what they wanted.”

The investors’ objective, in part, was to move money out of China and into U.S. commercial property, said brokers who have arranged similar deals for wealthy Chinese in recent years. That goal became more pressing over the summer, after a plunging stock market rattled investors and a sharply slowing economy prompted Chinese officials to devalue the nation’s currency. Authorities beefed up enforcement of rules designed to keep money from exiting the country. Many wealthy Chinese worry that Beijing could strip them of their wealth or inflate away their savings by cheapening the currency further, brokers said. That motivates them to move large sums outside the country, ideally without drawing attention.

China has been the largest foreign holder of U.S. Treasurys since 2008, but more recently its buying interest in the U.S. has spread to Chinese companies and wealthy individuals. A Chinese insurer earlier this year paid $1.95 billion for New York’s Waldorf Astoria hotel—a record price for a U.S. hotel sale—after Chinese regulators relaxed rules for big insurers investing in overseas real estate. Wealthy Chinese also have been eager to buy houses or apartments in the U.S. After a five-year spending binge, Chinese displaced Canadians as the top foreign buyers of U.S. homes for the 12 months to March, according to the most recent data from the National Association of Realtors.

While wealthy Chinese home buyers have pulled back on U.S. purchases in recent months amid the market turmoil at home, investors looking for commercial property have kept buying aggressively, brokers said. Many have centered on unlikely investments such as small office buildings, chain hotels and other nondescript properties in and around big U.S. cities, seizing an opportunity to place greater sums of money outside their government’s reach.Over the past couple of years, Chinese investors have acquired a strip mall near Long Beach, Calif., a Marriott hotel near Los Angeles International Airport and a waterfront office building on New York’s Staten Island, according to property records, brokers and other parties in the deals. They have helped fund at least two big condo projects in Westchester County and purchased large swaths of property in the Queens, N.Y., neighborhood of Elmhurst, according to the people and property records.

“It isn’t just about finding yield, but about parking their capital,” said Joshua Zegen, co-founder at New York-based Madison Realty Capital. His firm made a loan to the developer of a $100 million luxury apartment development in Queens that counts wealthy Chinese among its investors. Read Entire Story Here:

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