Land Grab: Rich Chinese are snapping up America's real estate

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Land Grab: Rich Chinese are snapping up America's real estate
By Les Christie @CNNMoney July 8, 2014: 10:18 AM ET

Chinese buying spree for U.S. homes
NEW YORK (CNNMoney)
The U.S. housing recovery is still going and international buyers are giving a huge boost, with the Chinese leading the charge.
Chinese buying was up nearly 80% to $22 billion -- nearly 1 in 4 dollars of all foreign purchases, according to the National Association of Realtors.
Canadians are actually No. 1 in terms of total homes bought, but the Chinese buy much more expensive homes: An average price of $591,000.
The Chinese also bring a lot of cash to the table: More than three-quarters of their purchases were all-cash buys.
California is the biggest market for the Chinese, accounting for a third of their purchases.
Washington State, however, is coming up quickly, accounting for 9% of buys. It's followed by New York, Pennsylvania and Texas.
Related: Top 10 cities for Chinese homebuyers
Why are they buying? Only 39% of Chinese buyers said they intended to use their purchases as their main home.
Some may buy condos for their children attending U.S. colleges. They hope that, in addition to saving on dormitory fees, they can make benefit from home price appreciation by the time the students graduate.
Others are becoming landlords, buying cheap homes in distressed economic pockets, like Detroit, and renting them out.
Still others use the homes as vacation properties a couple of weeks a year and rent them out the rest of the time.
In addition to the tide of Chinese buyers and the Canadians, those from Mexico, India and the United Kingdom filled out the top five list. India also had a notable jump in money spent -- 48% growth.

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China’s Anbang to buy Waldorf Astoria for $2.2b

Hilton said the hotel would also be renovated and that it would continue to operate the property for the next 100 years. Photo: AP
New York City’s Waldorf Astoria hotel is set to become the biggest prize yet for buyers from China who have been pouring money into US real estate as they seek stable investments outside their country.

Beijing’s Anbang Insurance Group agreed to pay $US1.95 billion ($2.22 billion) for the 1232-room tower on Park Avenue, an Art Deco landmark and one of Manhattan’s signature properties. That would be the highest price for a single existing hotel in the country, and the most paid for a standing US building by a Chinese buyer, said Kevin Mallory, global head of the hotels unit of commercial real estate brokerage CBRE Group.

“We’re seeing a diversification strategy being employed by insurance companies and others, and it’s also true when it comes to private Chinese investors,” he said in a telephone interview. “We’ve seen a lot of wealth generated there over the last decade, and we see see private investors diversifying their portfolio around the globe.”

HIGH PROFILE
The Waldorf deal follows such high-profile New York acquisitions as Shanghai-based Greenland Holding Group’s purchase this year of a 70 per cent interest in the Atlantic Yards project in Brooklyn. In late 2013, billionaire Guo Guangchang’s Fosun International paid $US725 million for lower Manhattan’s 1 Chase Manhattan Plaza, the former headquarters of Chase Manhattan Bank.

Earlier last year, a group including Zhang Xin, co-founder of Shanghai’s Soho China, took a 40 per cent stake in midtown Manhattan’s General Motors Building, one of New York’s most-valuable office towers, said Doug Murphy, director of analytics at Real Capital Analytics, a research firm that tracks commercial real estate sales. That $US1.4 billion deal was the largest Chinese purchase of a US building before the pending Waldorf sale, he said.

Including Anbang’s purchase of the Waldorf from Hilton Worldwide Holdings, Chinese investors will have bought $US2.7 billion of New York-area real estate in 2014, topping last year’s $US2.6 billion, according to Real Capital.

In the past couple years, the Chinese government has allowed the country’s insurance companies to allocate a portion of their funds into global real estate, Mallory said. With concerns about volatility in the property market at home, New York and and other major markets around the world, including London and Paris, “tend to be safe havens for any global investor,” he said.

SIZE AN ATTRACTION
The size of the Waldorf deal is another attraction, said Bruce Ford, senior vice president and director of global business development at research firm Lodging Econometrics.

“If you have $US2 billion to invest, isn’t it easier to buy one asset at arguably the greatest address in the world rather than 10 different ones?” he said.

As with the Atlantic Yards and Chase investments, the Waldorf’s buyer will have to spend additional money to realise the property’s revenue potential. Atlantic Yards’ 14 apartment buildings, recently renamed Pacific Park, are almost entirely unbuilt, and the Chase building’s main tenant, JPMorgan Chase, will vacate most of its space in the 60-story tower. Fosun last month said it had hired brokerage Jones Lang LaSalle Inc. to manage the leasing of the building.

Anbang is planning a major renovation of the Waldorf, “which we believe will include converting some of the higher floors to condominiums,” Patrick Scholes, an analyst at SunTrust Robinson Humphrey, said today in a research note.

Another iconic New York hotel, the Plaza, was split between condominiums and hotel rooms when it reopened in 2008 after a two-year restoration that cost more than $US400 million.

“This is a tremendous amount of capital, and there are very few global players who have access to this type of capital,” Mallory said. “The Chinese appear to have it.”

Bloomberg

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USD 1.582m per room with USD 461 per weekend night (8 Nov sampling from Trivago)