Chinese investors, once so eager to purchase trophy real estate assets in the U.S., are now starting to unload some of it in order to comply with Beijing regulations and pay their debt. According to data from Real Capital Analytics published by the Wall Street Journal, Chinese investors sold $1.29 billion worth of U.S. commercial real estate during the second quarter of 2018, and they invested just $126 million in acquisitions. Consequently, they became net sellers for the first time in a decade.
The fact that Chinese insurers, conglomerates and other investors often paid record prices for prized U.S. properties, pushing up market values, was well known. Anbang’s $1.95 billion purchase of the Waldorf Astoria marked the highest price ever paid for a U.S. hotel, while Sunshine Insurance Group buying the Baccarat Hotel for $230 million brought the price of a room to $2 million. Experts say that the reason behind these purchases was the executives’ desire to boost company prestige and brand recognition.
However, a few years ago, China started to take measures against large Chinese investments overseas, trying to slow the movement of capital offshore and the depreciation of the Chinese yuan. Now, the increasing tension between China and the U.S., sparked over trade and national security, is adding fuel to the fire. Companies like HNA Group and Greenland Holding Group are under pressure to sell.
Earlier this year, HNA sold 1180 Avenue of the Americas for $305 million and 123 Mission Street in San Francisco for $300 million. 850 Third Avenue might also change owners, as HNA is facing liquidity problems. Last month, Greenland sold Oyster Point, a South San Francisco life science development site, to Kilroy Realty Corp. for $308 million.
While some of these investors-turned-sellers struggle to break even, others are holding out for the right price. Greenland is looking to sell Hotel Indigo in Los Angeles, but has yet to find the right buyer. Conglomerate Dalian Wanda Group wants to sell One Beverly Hills, a Beverly Hills condo and hotel development site, but appears to be waiting for a higher bid after failing to get the desired price.
“So far, the decisions [Chinese investors] are making are still rational,” Edward Tse, CEO of Gao Feng Advisory Co., a Shanghai-based consulting firm, told the Wall Street Journal.
