Falling commercial property prices bring out mainland investors hoping for eventual rebound
Sandy Li in New York 20 June 2011
Chinese investors are splashing out billions of US dollars in New York as they bet the city’s turbulent property investment market will rebound.
Prices of commercial properties in the city have plunged by more than 40 per cent from their peak in 2007, and eager mainland investors are buying whole office floors, making the acquisitions through a combination of equity and debt.
“The Chinese like big deals - trophy properties, something outstanding. They prefer class-A properties,” said Howard Michaels, chairman of Carlton Group, which arranged the financing for a Chinese investor to take a majority stake in a prime office building at 1180 Sixth Avenue for US$265 million last month.
In January, Murray Hill Properties, the owner of the property, defaulted on its loan and appointed real estate investment banking group Carlton to save it from foreclosure. It bought the building for US$300 million in 2007.
“It was probably the largest transaction made by a Chinese investor so far this year,” Michaels said.
He closed more than US$3 billion in deals last year and expects sales to rise this year. He believes strong buying interest from China, Europe and the Middle East will continue.
“When the US property market gets too hot, international investors won’t look at us because of low investment yields,” Michaels said.
But with commercial properties offering yields of 7.2 per cent a year as of the fourth quarter last year against a 3.46 per cent return on 10-year Treasuries, investors were returning to the market.
Late last year, China’s biggest property information website, Soufun Holdings, bought the former AIG Training Centre for US$46 million.
The deal for the 250,000 square foot office at 72 Wall Street came three months after Soufun’s US$124.1 million listing on the New York Stock Exchange in September last year.
“We will use it as a global training centre for our management, staff and others in conjunction with selected universities in the US,” said Jill Jiao, investor relations officer at Soufun in Beijing. The centre will invite professionals to host seminars for staff and to outsiders for a fee.
Jiao said the courses would contribute income as many mainland executives would be interested in attending the seminars.
In January, China Investment Corp reported it had joined forces with Area Real Estate Finance Corp of New York to buy an unspecified preferred equity stake in 650 Madison Avenue. The 27-storey building is headquarters to fashion label Polo Ralph Lauren. The amount of the investment was unavailable.
According to data from research firm Real Capital Analytics, commercial property buying in the city by foreign buyers rose to US$6.7 billion last year, from US$3.8 billion in 2009.
Chinese purchases jumped to US$127 million last year from US$18 million in 2009. The data did not include purchases through property funds, a route commonly used by Chinese buyers.
Paul Liang, the president of Fortune Group, a US private equity fund that provides property refinancing, said the next two years would be the best time to buy pre-foreclosure commercial properties in prime locations.
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Chinese buyers shopping for prime NY sites
Falling commercial property prices bring out mainland investors hoping for eventual rebound
Sandy Li in New York
20 June 2011
Chinese investors are splashing out billions of US dollars in New York as they bet the city’s turbulent property investment market will rebound.
Prices of commercial properties in the city have plunged by more than 40 per cent from their peak in 2007, and eager mainland investors are buying whole office floors, making the acquisitions through a combination of equity and debt.
“The Chinese like big deals - trophy properties, something outstanding. They prefer class-A properties,” said Howard Michaels, chairman of Carlton Group, which arranged the financing for a Chinese investor to take a majority stake in a prime office building at 1180 Sixth Avenue for US$265 million last month.
In January, Murray Hill Properties, the owner of the property, defaulted on its loan and appointed real estate investment banking group Carlton to save it from foreclosure. It bought the building for US$300 million in 2007.
“It was probably the largest transaction made by a Chinese investor so far this year,” Michaels said.
He closed more than US$3 billion in deals last year and expects sales to rise this year. He believes strong buying interest from China, Europe and the Middle East will continue.
“When the US property market gets too hot, international investors won’t look at us because of low investment yields,” Michaels said.
But with commercial properties offering yields of 7.2 per cent a year as of the fourth quarter last year against a 3.46 per cent return on 10-year Treasuries, investors were returning to the market.
Late last year, China’s biggest property information website, Soufun Holdings, bought the former AIG Training Centre for US$46 million.
The deal for the 250,000 square foot office at 72 Wall Street came three months after Soufun’s US$124.1 million listing on the New York Stock Exchange in September last year.
“We will use it as a global training centre for our management, staff and others in conjunction with selected universities in the US,” said Jill Jiao, investor relations officer at Soufun in Beijing. The centre will invite professionals to host seminars for staff and to outsiders for a fee.
Jiao said the courses would contribute income as many mainland executives would be interested in attending the seminars.
In January, China Investment Corp reported it had joined forces with Area Real Estate Finance Corp of New York to buy an unspecified preferred equity stake in 650 Madison Avenue. The 27-storey building is headquarters to fashion label Polo Ralph Lauren. The amount of the investment was unavailable.
According to data from research firm Real Capital Analytics, commercial property buying in the city by foreign buyers rose to US$6.7 billion last year, from US$3.8 billion in 2009.
Chinese purchases jumped to US$127 million last year from US$18 million in 2009. The data did not include purchases through property funds, a route commonly used by Chinese buyers.
Paul Liang, the president of Fortune Group, a US private equity fund that provides property refinancing, said the next two years would be the best time to buy pre-foreclosure commercial properties in prime locations.
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