—— This year, the pace of Chinese-funded institutions’ “buy, buy, buy” in the United States has not stopped for a moment. In the past May, the acquisition of landmark buildings in Manhattan, New York by two major Chinese institutions at high prices has once again become a topic in the real estate industry in China and the United States.
CIC purchased Wall Street office building
According to the New York commercial real estate media “The Real Deal”, China’s sovereign fund China Investment Corp. purchased a 49% stake in One New York Plaza, one of the core office buildings on Wall Street in May. CIC’s investment this time is nearly 700 million U.S. dollars. This 49% equity investment was purchased from the global office real estate giant Brookfield Office Properties (BCP).
One New York Plaza is located in Lower Manhattan, close to the New World Trade Center and only a few blocks away from the New York Stock Exchange. The large building is 50 stories high and is valued at $1.4 billion.
China Life invested in Times Square building
Soon after CIC completed the acquisition, at the end of May, China Life purchased the office building at 1285 American Avenue for $1.65 billion. The largest tenant of the building is UBS (occupied as North America Headquarter), with a total of approximately 1.8 million square feet and a height of 39 floors. It is located in the core area of Midtown Manhattan, only a few hundred meters away from Times Square and Central Park. It is a landmark of Manhattan.
While completing the project acquisition, China Life also completed the renewal of the UBS lease until 2032. The remaining two main tenants are the global headquarters of a large law firm and an international media group.
From the overall analysis of the U.S. real estate market, among the five types of real estate, including residential and hotels, commercial real estate has the best response to various indicators such as rent, demand, and vacancy rate. This is why Chinese-funded institutions have recently increased their investment in commercial real estate in New York.
Looking at only Chinese-funded companies’ acquisitions of U.S. commercial real estate, the Wall Street Journal pointed out that there have been 47 U.S. commercial real estate acquisitions completed and ongoing so far this year, with a total value of US$9.3 billion (approximately RMB 61 billion).
This means that Chinese investors are the most active overseas buyers of U.S. commercial real estate. During the same period, Canadian investors’ purchases of real estate in the U.S. totaled $4.2 billion (approximately ￥27.6 billion), less than half of China’s investment. This data is much higher than last year’s data. Last year, Chinese investors completed 71 U.S. commercial real estate transactions for a total of $6 billion (approximately RMB 39.4 billion).
Summary
The Wall Street Journal believes that many of these buyers are eager to diversify their assets. Others are worried about the risks in their home countries. Many analysts believe that Chinese investors hope to preserve their wealth through overseas investment.
Forbes also explained this phenomenon as related to China’s sluggish stock market and slowing economic growth. “Hedging the pressure of RMB depreciation is also one of the reasons why a large number of Chinese companies choose overseas mergers and acquisitions.” But the media also said. It is believed that Chinese-funded enterprises also focus on improving their global competitiveness.
The “Report on China’s Investment in U.S. Real Estate” recently jointly released by the Asia Society and Rosen Consulting Group stated that Chinese investors’ direct investment in U.S. commercial real estate and residential properties is expected from 2016 to 2020. It will accumulate at least US$218 billion, or approximately RMB 1.4 trillion.
The data in this article comes from The Wall Street Journal, The Real Deal, 21st Century Business Herald, and Forbes.