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September 10, 2015

This Morning With S.F.'s Top Foreign Investment Executives


We got some of the top minds in foreign investment to tell us what it takes to strike deals with China at Bisnow's S.F. Capital Markets Extravaganza event this morning at the historic Fairmont Hotel. Here's what they had to say.

Here are three: Polaris Pacific partner Chris Foley, TMG Partners CIO Matt Field and Kidder Mathews partner Skip Whitney. Matt tells us there is a tidal wave of Chinese capital coming into S.F. at the moment, with investors looking to place huge amounts of money. He says it's more efficient to find investments they like at scale. (Take the 2M SF First and Mission project TMG sold to Beijing-based Oceanwide Holdings.) While we think a couple of million square feet is a huge project, that doesn't even touch the scale in China.

Developers prefer passive buddies as investors, but that's not going to happen. The trick in Matt's biz is aligning withcapital partners who are smart and sophisticated. Lots of Chinese investors are building US-centric front ends and hiring Mandarin speaking, US educated people. Having a language bridge in house is key. Another tip: When cutting a deal with a Chinese investor, aim for the top decision-maker early on (for example: the chairman).

California - China Office of Trade and Investment exec director Ken Petrilla, who moderated, got his java on before panels got started. Here he's with Sperry Van Ness directorCatherine House, whose rock isn't shown in this pic (she tells us she tied the knot on Valentine's Day).

Ken calls his office a "well-kept secret"; Gov. Jerry Brown established the office in 2013 and asked him to direct it. He facilitates Chinese direct investment into California and has been in Shanghai most of this year. While he plays in a variety of industries (wine, clean energy, movies) the top of the list is real estate development, so he's on a first-name basis with lots of potential investors.

At Skip's firm, people do operating agreements and presentations in Mandarin to help investors understand and do business in a format they are comfortable with. He is bracing for a rise in private equity coming out of China. These days he calls this investment environment "China 2.0." Up until a year ago there were a lot of "tire kickers": US developers buying potential Chinese investors dinner with no deal that surfaced. Now more are putting people on the ground and merging cultures on US soil on a day-to-day basis.

Zarsion America president Arthur Wang's Brooklyn Basin project in Oakland has a total investment of $1.5B. More and more private companies from China are showing interest and are still encouraged by the favorable foreign exchange rate. He equates a US-Chinese partnership to a marriage; the honeymoon period doesn't last long, and as a partnership you need to realize there is a big difference in culture between the two countries-so direct and early communication is key.

Chris' condo sales firm has been working with China Vanke and Tishman on the LUMINA project. Now he's seeing one or two Chinese investment groups every 10 days stroll into his office. Anyone who doesn't think China will be a major force in the US is "crazy," he says. Culture and trust are huge issues and why it takes longer to get a deal done with the Chinese.

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