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March 03, 2015

Meet the Chinese developer quickly becoming one of the Bay Area's hungriest investors

San Francisco Business Times

Cory Weinberg

Little-known Fulton Street Ventures has paid $35 million in cash in the past month to pick up two properties approved for development in San Francisco's South of Market and Rincon Hill neighborhoods. The buys are actually the latest plays by the U.S. arm of China's 10th-largest developer - R&F Properties - to fulfill an aggressive Bay Area investment strategy.

Fulton Street Ventures, using the company name Full Energy Properties, bought the 325 Fremont St. highrise site from developer Crescent Heights for $28.5 million last week, according to property records. Crescent Heights, the developer of the high-profile NEMA apartments, sold the Fremont Street site for six times what it bought it for in 2012.

The Fremont Street site, a block from the high-profile Lumina towers, is one of the last properties ripe for development in Rincon Hill. It is approved for 25 floors and 118 luxury units.

That purchase comes a month after Fulton Street Ventures paid $7.3 million for a small site at 119th 7th St. in SoMa, which was approved for eight stories and 39 units, according to property records.

"I think they are the most currently active player in the market," said Darlene Chiu Bryant, executive director of ChinaSF, a nonprofit that connects Chinese companies to Bay Area investment opportunities.

Fulton Street Ventures is an affiliate of Guangzhou-based R&F Properties, which has $27.1 billion in assets, according to a 2014 report by the brokerage Knight Frank. The company (using different names) is also under construction on the 139-unit 555 Fulton in San Francisco's Hayes Valley neighborhood and on a 639-unit project in San Jose.

Some of China's most prolific developers such as Vanke Group ($81.8 billion in assets) and Gemdale Group ($21.9 billion in assets) have already plunked down hundreds of millions to acquire and build on formidable San Francisco highrise sites.

San Francisco attracted $807 million worth of Chinese capital over the last three years, though numbers are difficult to track because some money is filtered in through other private equity firms, according to Real Capital Analytics. That's the fourth-most of any U.S. market.

Last month, Oceanwide Holdings committed to the largest total investment yet by a Chinese developer when it said it would spend $1.6 billion to buy and build the coveted First and Mission Streets site.

The properties acquired by Fulton Street Ventures are not quite as glitzy or as large, but the company has quietly grown to about 15 employees in the Bay Area, said Ethan Pang, a broker with Kidder Mathews who found the company new office space late last year on Fillmore Street.

The company did not return emails seeking an interview. Pang said the company is savvy, shipping all its materials from China and using in-house contractors to control costs.

"As far as I know, they're still looking for projects in the Bay Area. They prefer entitled projects," Pang said. "They are still very aggressive looking for land deals, condo development sites."

Chinese developers have looked west toward the U.S. in recent years for a variety of reasons, as I detailed in January. China's real estate market has overheated at the same time when top U.S. markets such as San Francisco are seeing healthy growth. The Chinese government has also relaxed outbound investment restrictions.

Tony Crossley, executive vice president at Colliers International, which brokered the last two sales to Fulton Street Ventures, said that Chinese money has been a boon to U.S. developers. "This new pot of capital coming into San Francisco helps the development process," Crossley said.

Fulton Street Ventures paid cash for both properties, Crossley said. He added that it would probably take a year for the developer to finish design work and get building permits to start construction on the Rincon Hill property.

For the full story, go to San Francisco Business Times.

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