China Developers | China <b>Investment</b> NYC <b>Real Estate</b> | Real Estate Investing |
| China Developers | China <b>Investment</b> NYC <b>Real Estate</b> Posted: 13 Aug 2014 11:30 AM PDT  From left: Yu Liang, Guo Guangchang and Wang Jianlin The size of recent investments from Chinese firms and individuals in New York real estate has commanded headlines. Generally speaking, the properties being bought are familiar to those in the New York City property business. Those doing the buying, however, are less well known. In reality, the wave of Chinese investment in New York City property is being led by some of the biggest names in real estate in the People's Republic. Some of these investors hope to fill American condos with wealthy Chinese home seekers and stock U.S. offices with China's outwardly looking companies. For others, buying into U.S. assets represents a logical next step in expanding highly diversified portfolios. At the same time, Chinese developers — particularly residential developers — are facing a serious slump in the business, as home prices fall and vacancies rise in the country's cities. Indeed, a number of the nation's big builders have flagged overbuilding and high land prices as causes for concern. That helps explain, in part, why some of China's real estate titans are seeking out residential investments in overseas markets like New York. Here, then, is a look at six major property players in China that are making waves in New York.  From left: Yu Liang, 610 Lexington Avenue and Aby Rosen China Vanke Given China Vanke's position as the largest residential developer in China, one could say the company is starting small in the U.S. In February, a partnership comprised of Vanke, Aby Rosen's RFR Holdings and Hines broke ground on 610 Lexington Avenue, a 61-story condo building designed by Norman Foster. Vanke will also develop a four-building, 656-unit condo development in San Francisco called Lumina in partnership with Tishman Speyer. Vanke was founded in 1984, and began focusing on real estate in 1988. Since then, the company says it has built more than 500,000 homes in 70 cities. Vanke focuses on developing small residences for China's growing urban population. Last year, it constructed 160 million square feet and brought in $28 billion in revenue. Vanka recently voiced concern that prices are overheating in some Chinese cities, Reuters reported. Vanke president Yu Liang told a real estate forum the company could well plow 10 percent of its overall investment into overseas markets in the next five years. The company's preferred destination in the Western world? The U.S., according to the news service.  From left: Greenland chairman and president Zhang Yuliang, Pacific Park Brooklyn rendering and Bruce Ratner Greenland Holding Group It's no wonder Forest City Ratner chose Greenland Holding Group when it sought a partner to help expedite the construction of the Atlantic Yards project (recently rechristened Pacific Park Brooklyn). Greenland is Shanghai's largest state-owned enterprise. Since 1992, the company has built urban complexes, industrial parks and business districts in more than 80 Chinese cities. The company also specializes in developing ultra high-rise towers and has some of the world's tallest skyscrapers in its pipeline. Greenland is ranked number 268 in Fortune Magazine's Global 500 last year — two spots above Goldman Sachs – and has $58 billion of assets under management as of 2013. In addition to real estate, Greenland has significant interests in energy, finance, construction and hotel and commercial center operations.  From left: Guo Guangchang and 1 Chase Manhattan Plaza Fosun International Fosun International's $725 million purchase of 1 Chase Manhattan Plaza was the biggest foreign investment in commercial office space last year. That feat is no surprise when one considers the scale of Fosun's business. Formed in 1992, Fosun is China's largest closely held conglomerate. Its cofounder and Chairman, Guo Guangchang, has been called the Warren Buffet of China, making Fosun the Berkshire Hathaway of the Middle Kingdom. The company has nearly $30 billion in assets under management and posted about $1.3 billion in profits last year. Most of Fosun's $8.3 billion in revenues in 2013 came from industrial operations, which include pharmaceuticals, property development, steel production and mining. It plans to aggressively develop its other main businesses — insurance, investment and asset management – over the coming decade.  From left; Zhang Xin, General Motors Building and Pan Shiyi Zhang Xin and Pan Shiyi Last year, the wife-and-husband team of Zhang Xin and Pan Shiyi partnered with Brazilian banking magnate Moise Safra to take a 40 percent stake in the General Motors building for $700 million. The deal made Zhang and Pan stakeholders in one of the most valuable real estate assets in the US. The duo is no stranger to big deals. Zhang and Pan serve as the chief executive and chairman, respectively, for SOHO China, the country's largest developer of high-end office space. Founded in 1995, the company focuses on developing architecturally distinct buildings in Beijing and Shanghai by collaborating with notable architects such as of Zaha Hadid. Forbes puts Zhang and Pan's fortune at $3.9 billion. Last year, SOHO reported a profit of $1.3 billion on revenues of $2.4 billion. The company also transitioned to a business model focused on operating rather than selling buildings. SOHO has built about 32 million square feet of office space and has a total development portfolio of 58 million square feet.  From left: Wang Jianlin and AMC Empire 25 at 234 West 42nd Street Wang Jianlin Few details have emerged since Wanda Group chairman — and China's richest man — Wang Jianlin said last year he would invest $1 billion in a New York hotel and residence. But Wang has shown his ability to execute. He purchased cinema chain AMC group for $2.6 billion in 2012. He also spent $900 million on a 90-percent stake in a Chicago mixed-use development earlier this year. Last week, he won the right to develop a former department store in Beverly Hills with a $1.2 billion bid. Wang topped Forbes Magazine's China Rich List with an estimated wealth of $14.1 billion last year. Wanda Group's assets under management totaled $62.8 billion at the end of 2013. Wang spent 16 years in the army and did a brief stint with the Dalian city government before establishing Wanda Group in 1988. Initially focusing on urban reconstruction in the seaport city of Dalian, the company embarked in 1992 on residential development in Guangzhou, China's third largest city. Since then, Wanda has diversified into four major businesses: commercial real estate; hotel development and management; department stores; and cultural enterprises, including movie theaters, film production and theme parks.  From left: Xinyuan founder and chairman Yong Zhang and the Oosten at 429 Kent Avenue XIN Development In 2012, XIN Development purchased a Williamsburg condo site for $54 million. The firm has since begun construction on the Oosten, a 216-unit development designed by Dutch architect Piet Boons. XIN Development is the U.S. arm of the Beijing-based homebuilder Xinyuan Real Estate. Founded by chairman and CEO Yong Zhang in 1997, the company has a simple strategy: it acquires land in China's high-growth, second tier cities and develops middle-income housing. As of last year, Xinyuan had completed 28 projects comprising more than 42,000 apartments. Between 2009 and 2013, Xinyuan has grown revenues 50 percent to nearly $900 million, according to its last annual report. Xinyuan became the first Chinese real estate company to list on the New York Stock Exchange in December 2007. Investors don't appear to be entirely sold on the company, however. Xinyuan, which has a market cap of just $315 million, has seen its stock price tumble 73 percent since going public.  |
| <b>Investing</b> in Commercial <b>Real Estate</b> - Wealth Daily Posted: 14 Aug 2014 01:02 PM PDT Following one of the most devastating shake-outs in real estate values in over 80 years since the Great Depression, real estate has rebounded into one of the hottest markets in which to invest. Since the market bottomed in March of 2009, the Vanguard REIT ETF (NYSE: VNQ) holding an assortment of 138 residential, retail, office, storage and other REITs has soared an outstanding 275%, compared to the broader market S&P 500's 224%. In fact, compared to the nine sectors covered by the SPDR family of sector ETFs, VNQ has beaten eight. Over the five years since the economic recovery began, the only sector to beat the REIT sector has been consumer discretionary, as noted in the graph below comparing the VNQ (black) to SPDR's sector funds since March 15, 2009. (We'll talk about the red dot later.)
Source: BigCharts.com To get an idea of whether REITs will continue to outperform other sectors in the future, we need to look at what specifically made them perform so well so far. If the winds blowing in REITs sails continue, they should remain great investments. So what are those winds that have given REITs such an advantage? "Low interest rates are a positive for REITs," answers Steve Sakwa of International Strategy & Investment Group. "That has really been a big tailwind for the group… because they really offer investors an attractive yield alternative relative to Treasuries or fixed income, and you have a growth characteristic to that dividend yield that will go up and increase versus kind of a fixed return over a period of time." Low interest rates have fuelled the remarkable investor interest in REITs over the years, as other income instruments like Treasuries and corporate bonds offer poor yields and little room for capital appreciation. But doesn't this spell danger for REITs going forward? Interest rates will at some point in the not too distant future begin their long march back up to normal levels of about 5 to 6%, most likely at a steady pace of about 25 basis points per quarter, or 1 full percentage point each year, until around 2020. We might expect interest rates to present strong headwinds for REITs. Or maybe not. A look at the performance of REITs over the past year indicates they might not react to rising rates in the way we might expect. An Interest Rate Negative for REITs "I think we are going to see a pullback," David Toti of capital markets investment bank Cantor Fitzgerald gave his prediction for REIT stocks in the near future. "I think in the near term there's some potential weakness, but our view at this level, real estate is fairly valued." What lies on the horizon that could bring about this weakness in the REIT sector? Let's take a look at that red dot we mentioned earlier. In the graph above, we note how the REIT sector (as represented here by the VNQ ETF of 138 REIT stocks) was hit hard beginning in May of 2013, and continued falling straight through to the end of December. Remember what all the talk was about in May of 2013? The tapering of the U.S. Federal Reserve's monthly bond-buying program, or Quantitative Easing III (QE3). As the Fed spent the following 6 to 7 months getting the markets ready for stimulus reductions, investors went even further and started getting themselves ready for rising interest rates as well. The era of cheap low interest loans was about to come to an end, which would mean the end of the REIT boom. Or so it was believed. In theory, rising interest rates would hurt REITs because commercial real estate companies that purchase apartment buildings, shopping malls and office space would now have to pay higher rates of interest on their loans for their properties, cutting into their profits. Investors would therefore be likely to exit REIT stocks in favor of Treasuries and corporate bonds. True, rising interest rates would cause an initial sell-off in Treasuries and bonds as well. But once they stabilize, investors would be loured into bonds which would then offer yields comparable to REITs, but with less risk. In practice, however, something quite different happened when the Fed actually started reducing its stimulus in January of 2014. As noted in the graph above, VNQ started rising again. It seems tapering talk was worse than its bite. There must be other factors at play in the real estate market that are somehow strong enough to overpower the negative pressures of less stimulus and a subsequent monetary tightening. Stay on top of the hottest investment ideas before they hit Wall Street. Sign up for the Wealth Daily newsletter below. You'll also get our free report, Gold & Silver Mining Stocks. An Interest Rate Positive for REITs While REITs will undoubtedly experience another mid-2013-like pullback at the beginning of the journey back to higher rates, the demand for commercial properties especially rental housing should be strong enough to offset any drag caused by rising interest rates. "Market fundamentals are expected to remain strong over the next two years, according to a recent report from Freddie Mac," reports CNBC. "Analysts there point to an estimated 3.9 million potential households that weren't formed due to the Great Recession, with young adults accounting for close to 75 percent of those pent-up households." High unemployment over the past few years prevented many singles and young families from renting places of their own, forcing them to share with roommates or live with family. But as the employment situation continues improving, the demand for multifamily residential units could grow by some 440,000 each year. "Over the long run, we expect the demand for multifamily units to be stronger than pre-recession levels," Steve Guggenmos, Freddie Mac senior director of multifamily investments and research projected. "As the economy improves, and most pent-up demand releases, demographic trends will be (disproportionately) favorable for the multifamily sector, due to the young adults comprising a large share of suppressed household formation." In other words, singles and young families who were once held back from forming their own households will be released into the residential rental market like a coiled spring unsprung. This demand will not only sustain residential REITs, but may even enable them to steadily raise rents, offsetting or even beating any higher operating costs brought by higher interest rates. Another positive for REITs would, ironically enough, come as a direct result of rising interest rates, as they make mortgages more expensive to shoulder. As noted in the first graph below, rising mortgage rates during all that tapering talk of 2013 caused a dramatic slowdown in existing home sales (red). When mortgage rates stabilized in early 2014, home sales rose (green).
Source: TradingEconomics.com Yet while existing home sales rebounded, new building permits and housing starts continued their flatlining begun in 2013, as noted in the second graph above. New housing has stopped growing. If new housing has plateaued with interest rates still at exceptionally low levels today, imagine the effect higher interest rates will have. Higher mortgage rates will slow the wave of home buying to a trickle, keeping the demand for rental units high. REITs Should Remain Strong Thus, residential REITs should fair well even in a rising interest rate environment mainly for two reasons: • Rising interest rates will push mortgages and home buying out of the reach of more families, thus keeping them in their rental units a little longer (sustaining demand). • Rising interest rates will come on the back of an improving economy and improving employment situation, meaning that more families and singles will be able to afford renting residences of their own (adding to demand). Rather than kill the entire REIT play, if anything, rising interest rates will likely cause a separation of the various REIT sub-sectors from one another. For instance, while the residential REIT sub-sector should continue to enjoy high demand as noted above, the retail REIT sub-sector might experience slower growth or even stagnation – since higher interest rates result in a higher cost of capital, preventing many small businesses from expanding and opening new shops. Thus, if a general all-purpose REIT ETF like VNQ (which owns residential, retail, storage, and office REITs in its portfolio) is too much coverage for your liking, you might decide to specialize within one or two REIT sub-sectors, with a leaning toward residential REITs as opposed to retail or others. Shops may shut down, but people will always need a place to live. Joseph Cafariello Media / Interview Requests? Click Here. |
| You are subscribed to email updates from Real Estate Investing - Google Blog Search To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
No comments:
Post a Comment