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November 30, 2016

Chinese real estate investors grow wary of U.S. market

Puget Sound Business Journal

Marc Stiles

Some investors from China are backing away from investing in real estate in the U.S, according to a new Wall Street Journal report.

Chinese investors have been investing large sums of money in commercial real estate projects in the Puget Sound area, so if this new hesitancy continues and expands it will shut off a key source of funding for local developments.

The Wall Street Journal reported that in New York City, a swelling supply of luxury condos means possible losses for some Chinese developers. The newspaper added that some Chinese investors are shelving projects in New York.

"I see a danger in the real-estate market in the U.S.," John Liang, Xinyuan Real Estate's managing director of U.S. operations, told the Journal. "With its seven- to eight-year cycle, you get a sense now that it's peaking."

Meanwhile, new Chinese regulations are also expected to crimp overseas investments. Beijing is again planning to clamp down on Chinese capital leaving the country, according to the report.

In addition, Chinese-backed projects are getting caught up in legal fights and other delays. Disputes are delaying developments there and in Los Angeles.

China Vanke Co., which is investing in a 43-story residential tower in Seattle near the Space Needle, and U.S. partners have been stymied on a New York luxury apartment project due to controversy. Vanke has 13 other residential projects in the U.S., including the one in Seattle, and all of these are moving forward, the Journal reported.

If and when the pullback by Chinese investors comes to the Puget Sound region remains to be seen. Chinese and U.S. developers continue to strike deals. Earlier this month in Redmond, a Beijing-based investor and a Seattle developer paid $31 million for a nearly four-acre property where they're looking into building apartments, condos, a retirement community and retail space.

Culturally, real estate development in the United States is very different than in China. A Mandarin-speaking real estate broker in Bellevue talked about this last year in an interview with the Puget Sound Business Journal. She said that in China, development is driven even more by relationships than in the U.S.

"We have a lot of inbound Chinese investors," said Holly Yang, a vice president with Kidder Mathews, said. "The first thing they say is, 'Do you know the mayor?' Do you know the governor? We want to meet them.'" She added that some foreign investors are perplexed by U.S. regulations, such as zoning. In China, regulations are "very subjective and open to interpretation," said Yang.

For the full story, go to Puget Sound Business Journal.

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