Despite global volatility and what many investors view as a heated market, Chinese investors will continue to be bullish – but more cautious – about investing in US real estate, panelists at the RICS Tri-State International Investment Panel 2016 in New York said last week.
Jerome Sanzo, the head of real estate finance for Industrial and Commercial Bank of China, said that, anecdotally, he thinks smaller businesses and individuals are experiencing more difficulty getting money out of China. But larger enterprises, particularly those owned by the state, will continue to deploy capital in the US despite any initial hurdles, he said.
“The Chinese want to export capital and obviously they’re building it up,” Sanzo said. “I know of one larger state-owned enterprise that had difficulty when they were trying to make an acquisition here but it eventually got resolved.”
He told the audience to look for headlines after the Chinese New Year, which ended last week, to see more announcements of Chinese companies buying American property. Sanzo also addressed a question on Chinese repatriation, which he said is at the top of many Americans’ concerns when discussing cross-border capital.
“I don’t think that’s going to happen,” he said. “I think there’s a window to continue investing (in the US); the question is how long that window lasts.”
Another panelist, a partner with Toronto-based Brookfield Financial, said he likewise predicts that Chinese investors will seek to deploy capital in the US, but will do so with more restraint going forward.
“Where they have been buying the trophy assets, they’re going to be cautious in buying and underwriting,” he said. “One of the really interesting things is how many groups are looking to go to senior and mezzanine debt,” which are being viewed as lower-risk investments in real estate.
Despite volatility, Chinese cross-border real estate capital was up 63 percent in 2015, to $14.5 billion, compared with the previous year, according to real estate data provider Real Capital Analytics. The US was the top destination for Chinese capital, with $9.1 billion flowing to US real estate investments, up 71 percent from 2014, according to RCA.