Wednesday, November 28, 2012

Chinese Development in NYC

Xinyuan Real Estate Company recently purchased a 216 unit condominium building in Brooklyn, NY, at a cost of $54.2m, making its first ever development in America. The firm plans to spend an additional $200m on this project. It is anticipated that sales thereafter will be between $250 and $350 million.
Xinyuan Real Estate Company is also looking for other projects in America.  The idea is to sell close to half of the units it builds to Chinese investors. According to Omer Ozden, (a partner at Beijing Capital, the private equity arm of the Beijing municipal government), Chinese investors it seems, are more likely to purchase buildings from Chinese developers in the US, than their American counterparts.  Chinese investment in American real estate has been growing steadily, with a focus on residential properties.

New York private equity is becoming increasingly popular for Chinese investors.  In recent years, the government in China has been making attempts to deflate the local housing bubble.  In order to achieve this, it has limited permission of property purchases.  Thus the Chinese who want to invest in real estate are instead turning to America.  Indeed, as the National Association of Realtors’ report noted, residential sales for the year ended in March saw $9bn in American residential sales from the Chinese.

The city of New York is also gaining popularity for Chinese investors as that is one of the places where they would like to live (along with LA, San Francisco and Miami).  Thus as Ozden noted, these investors are purchasing properties that they will seek to rent out or use as second homes or places for their children to stay while studying abroad.  In the past, Chinese investors have had a harder time locating the right property in America, as navigating US culture has not been so easy.  Thus Xinyuan Real Estate Company is now providing a great solution for Chinese looking to participate in New York private equity deals.