—— According to a report in July last year by Financial Times, more than 60% of the wealthy in China considered a series of advantages such as safe and stable overseas investment, a comfortable environment, elite education, and rich welfare and said that they plan to increase their overseas assets in the next two years.
In recent years, many large Chinese companies have spent a huge amount of money to purchase real estate or invest in commercial real estate in the United States. The United States is the busiest market absorbing Chinese foreign capital. Not only large financial institutions and insurance companies but domestic large and small developers are participating in this wave. Also, there are many individual homebuyers purchasing properties in the U.S. The performance of China’s capital on the global market comes impressively.
Anbang Group’s big move
The famous landmark, Waldorf Astoria in Manhattan, New York, was acquired by China Anbang Insurance Group for $1.95 billion in 2014, marking the largest transaction in the history of the U.S. hotel industry. It is rumored that the Chinese owner wants to convert most of the nearly 1,400 rooms in the hotel, nearly a thousand rooms into luxury condominiums. The Anbang Group does not comment on the rumors, saying that it is still “continuing to explore various options and has not yet finalized plans.”
Anbang Insurance announced in its 2014 acquisition agreement with the Hilton Group that it would overhaul the Waldorf Astoria Hotel to restore the luxurious original appearance of the world-renowned legendary hotel. However, within a few months after the completion of the acquisition, the hotel owned by the Anbang Group moved frequently. First, at the beginning of this year, to study the feasibility of large-scale renovation, the 12th and 24th floors of the hotel were demolished and opened up. The New York City Department of Finance submitted a plan to use more than 1.2 million square feet of space, accounting for about 75% of the hotel’s total area, for residential use.
LeEco purchased California land
According to a report by CNBC on June 11, LeEco has completed the acquisition of 46.6 acres (approximately 197,000 square meters) of land in Santa Clara County, California, for $250 million (approximately RMB 1.644 billion), and will use the land to expand its R&D and operations in North America. According to a report on the San Francisco Chronicle website on the 17th, a LeEco spokeswoman confirmed the land purchase transaction but did not further disclose the future use of the land.
On April 2 this year, LeEco established its North American headquarters in the core city of California, known as the “Capital of Silicon Valley.” The building can offer working space for 800 employees. Part of the newly purchased land will expand the business and expand LeEco’s exploration in Silicon Valley.
Vanke global cooperation
Vanke and Brightstone Capital Partners, a U.S. asset management company, jointly announced the establishment of a global real estate investment management platform “Brightstone” in New York.
Vanke’s investment in Lumina is one of the most successful cases of Chinese developers in the United States
The establishment of the Brightstone platform is an important extension of Vanke’s investment strategy, and it is also the beginning of Vanke’s overseas investment from real estate development to real estate investment and asset management.
Vanke staff said that the domestic real estate industry has transitioned from the golden age of rapid growth to the silver age, and Vanke is actively transforming. Internationalization is one of Vanke’s long-term development directions. “The establishment of the Brightstone platform will enhance Vanke’s overseas investment layout capabilities and help the company integrate global resources.”
Whether it is commercial real estate investment or the overseas extension of real estate investment platforms, we can see that institutions have turned their eyes to the United States. Chinese-funded enterprises have shown a strong lead in US commercial real estate investment in recent years, and Chinese capital leads the American real estate “Oscar”.
So, what causes these institutions to bet on the U.S. real estate industry one after another? Let’s take a look!
U.S. vs China: Freehold property rights to inherit assets, laws and regulations improve market framework
American real estate owners have permanent property rights, which is very important for the inheritance of capital. As we all know, China’s real estate property rights have only been 70 years old, and it is still not possible to pass on them as fixed assets.
Compared with Chinese real estate, the biggest advantage of the U.S. real estate is that the entire industry has gradually formed with a relatively mature legal system and market after a century of development and improvement.
There are many clear laws and regulations that restrict developers and protect the property safety of buyers. In addition, there are property rights investigations, property rights insurance, etc., which effectively prevent possible risks. However, China’s legal system in this area is still in the process of improvement, and there are many gaps and loopholes. Therefore, if you choose to invest in real estate in the United States, the security of capital invested is relatively higher.
Advantages of U.S. real estate
At the same time, Chinese investors are also 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 total investment.
The data for the first half of this year is much higher than the data for the whole year of last year. Last year, Chinese investors completed 71 U.S. commercial real estate transactions for a total of $6 billion (approximately RMB 39.4 billion).
Rational property price growth
From an investment perspective, China’s real estate price growth rate in recent years has been amazing, but it has also made many investors worry about the existence of a bubble in the Chinese real estate market and began to choose US real estate because of the stability of its growth.
On the one hand, most of the real estate data in the United States is public, and buyers can go to the government website to view all the details of the intended real estate. All transaction information, including actual prices, tax amounts, transaction dates, and transaction status, must be clearly reported. This effectively avoids the occurrence of real estate speculation. In other words, the current U.S. real estate market has relatively higher transparency.
Also, the current U.S. real estate market is in a long-term growth phase after the 2008 financial crisis.
Many people in the industry said that the rise in real estate prices in the United States in recent years has benefited from many factors: the strong growth of the overall economy, the rebound of real estate after the financial crisis, the huge rigid demand of millennials after entering the house purchase ages, and strong needs from immigrants and overseas investors’ asset allocation, etc.
The boom in commercial real estate in the United States not only attracts many big companies around the world but attracts a large number of small and medium investors.
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The data in this article comes from The Wall Street Journal, Financial Times, and Bloomberg, etc.