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Chinese Investments In US Commercial Property Soar By 500%

Tyler Durden's picture




 

Investors from multi-billion dollar hedge funds to individuals buying as few as 10 properties have acquired more than 1 million homes across the U.S. in the past three years, transforming a mom-and-pop business into one of Wall Street's hottest investments. As we noted here, Blackstone Group LP alone has acquired more than 40,000 properties in 14 cities to become the largest single-family landlord in the country. As Bloomberg notes, the new landlords are transforming the way Americans live and accumulate wealth. But while Wall Street is becoming America's largest residential landlord, it appears China wants to get paid for commercial properties... and Detroit.

Via Reuters,

Chinese investors, the second-biggest overseas buyers of U.S. residential real estate, are building up portfolios of U.S. commercial property as they look for new avenues of diversification.

 

Chinese entities announced more than $5.89 billion in projects in January-October, nearly six times the $996 million for all of 2011 and 2012 combined, showed data from New York-based consultancy Rhodium Group.

 

"There is a lot of upside," said Thilo Hanemann, Rhodium's research director. "We are at the beginning of a structural increase of Chinese investment in U.S. commercial real estate."

 

...

 

China's push into U.S. property is underpinned by declining investment returns at home, a growing desire by wealthy individuals and developers to diversify their holdings overseas, and property companies looking to capitalize on offshore migration.

 

...

 

Chinese nationals bought more than $8.1 billion worth of real estate in the year ended March 31, representing 12 percent of the estimated $68.2 billion of domestic property purchased by overseas nationals

 

...

 

Not everyone is convinced that Chinese investment in the U.S. property market will continue uninterrupted. Other options for expansion include Europe, Australia and Singapore, which account for about two-thirds of offshore Chinese real estate investment, according to Jones Lang Lasalle.

 

Zhang Xin, the chief executive of SOHO China Ltd, who paid $700 million through her family trust to buy a stake in the General Motors Building in Manhattan, said that while the U.S. regulatory and legal environment remained attractive, valuations were getting expensive.

 

"I would not feel as comfortable today putting in money as I did a few years ago," Zhang said.

So reform and liberalization in China sees hot money flowing not just into Bitcoin but now commercial property in America.

While Wall Street becoming America's largest residential landlord, it appears China wants to get paid for commercial properties... and Detroit.

 

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Mon, 12/23/2013 - 13:01 | 4271014 USA USA
USA USA's picture

Why buy it?

Give us time and they can just have it!

Mon, 12/23/2013 - 13:18 | 4271041 hedgeless_horseman
hedgeless_horseman's picture

 

 

"We are at the beginning of a structural increase of Chinese investment in U.S. commercial real estate."

Nobody here but us chickens...

Mon, 12/23/2013 - 13:17 | 4271049 Dr. Engali
Dr. Engali's picture

Interesting contrast Horseman

Mon, 12/23/2013 - 13:28 | 4271053 hedgeless_horseman
hedgeless_horseman's picture

 

 

Everything seems fine as long as the rent payments eggs keep coming regularly, but I know what happens when the hens stop producing.

Chicken and dumplings!

Don't be a commercial layer, be the farmer.

Mon, 12/23/2013 - 13:29 | 4271082 Dr. Engali
Dr. Engali's picture

Systems that get the bulk of their food from places like this are doomed to collapse:

 

https://www.youtube.com/watch?v=JJ--faib7to

 

When it does break down it's going to be ugly.

Mon, 12/23/2013 - 13:37 | 4271104 DeadFred
DeadFred's picture

Del Monte Foods becomes a Chinese owned company in January. 

Mon, 12/23/2013 - 17:52 | 4271807 thestarl
thestarl's picture

As usual your right Doc.

Mon, 12/23/2013 - 19:44 | 4272046 My Days Are Get...
My Days Are Getting Fewer's picture

99% of the time I agree with your observations.

 

But in this case, I ask you to devise a "better" system.

 

I had a pond infested with leeches.  I trapped them I placed them live in gasoline.  A neighbor complained - she said that the leeches had nerves and were be killed inhumanly.  I asked her if I could dump them on her front lawn.  That ended that.

This year, I took the next step - I introduced large mouth bass into the pond - bass love to eat leeches.  I suppose the trip down the gullet in less inhuman that a dunk in gasoline.

 

Best Regards

Tue, 12/24/2013 - 17:41 | 4274024 Oracle 911
Oracle 911's picture

Glass of old beer works to, not just you get rid of leeches, but snails too.

Mon, 12/23/2013 - 13:31 | 4271087 DoChenRollingBearing
DoChenRollingBearing's picture

An Italian lady, friend of my wife, is in town.  She told us that the Chinese are buying wholescale there in Italy.  Properties in Tuscany.  Vineyards.  Trophy properties.

Here in our city (relatively few Oriental folks), we are seeing a bit more, a Chinese family just moved into our condo building.

Hey, if they have the money, they should be allowed to spend it.

Mon, 12/23/2013 - 14:24 | 4271292 therover
therover's picture

I thought the maestro said there weren't any homes for sale in Tuscany ( Seinfeld reference).

Mon, 12/23/2013 - 14:51 | 4271370 ich1baN
ich1baN's picture

They are buying because they know the destruction that is about to happen in China. I lived there and saw it firsthand and my chinese girlfriend hasn't been paid in 6 months. 

The whole place is about to experience a great depression... hopefully it happens relatively soon. I hate the CCP.

Mon, 12/23/2013 - 14:23 | 4271289 therover
therover's picture

Damn, that looks good HH.

Mon, 12/23/2013 - 17:56 | 4271812 Mugatu
Mugatu's picture

Reminds me of two events:

1. In the 80's everyone thought that Japan was going to buy all the real estate in the US.  How did that end?

2. In 2006 while traveling in California everyone I met with was looking into Texas real estate (I'm from Texas).  I asked why everyone was looking for property in Texas and they remarked that California real estate prices were slowing down and they were looking for greener pastures.  They were so hooked on the ponzi real estate game that even when  they knew their own property was doomed, they had to look elsewhere for a new game. 

Mon, 12/23/2013 - 13:51 | 4271182 ZeroPoint
ZeroPoint's picture

They will demand it when the dollar collapses, to cover their worthless US Treasuries.

Mon, 12/23/2013 - 14:49 | 4271362 ich1baN
ich1baN's picture

My Chinese girlfriend works in Beijing and she hasn't been paid in 6 months.... this is a common trend in China with other schools that her friends teach at....

I've calculated the debt her school is in and it is massive..... it is the same case for most municipal and private schools in China.

The implosion is about to happen and its going to be worse than the Great Depression because of the circumstances in China, combined with the property bubble.

Mon, 12/23/2013 - 15:20 | 4271455 Sofa King Confused
Sofa King Confused's picture

I think China may collapse but, when they turn things around I think we will see a new gold backed Yuan.

Mon, 12/23/2013 - 13:05 | 4271016 pods
pods's picture

The new normal of serfdom.  Now the moneyed interests are going to buy up your property with conjured credit money.

I wonder what the Chinese word for force majeure is?  Because once China is officialy declared an enemy, all bets are off.

Guess they are following the Japanese playbook from the 80s?  They should have seen how well that Pebble Beach acquisition went.

pods

Mon, 12/23/2013 - 13:10 | 4271031 Winston Churchill
Winston Churchill's picture

How much direct investment does corporate US have in China.

I think the Chinese would be the big winners in a tit for tat.

Lets face it,Junk UST's for junk property that may be worth something sometime, unlike the UST's.

Mon, 12/23/2013 - 13:12 | 4271036 Big Slick
Big Slick's picture

The Japanese did not have the ability to withdraw payment by force. 

Chinese ICBMs have the best guidance systems that Clinton campaign contributions can buy.

 

http://en.wikipedia.org/wiki/Loral_Corporation

"Loral was accused of transferring technology to China in 1996... In a 2002 agreement with the State Department and Department of Justice the company agreed to pay $20 million in fines to settle the matter and to improve its compliance procedures. In the agreement... Loral executives acknowledged "the nature and seriousness of the offenses alleged by the department in the draft charging letter, including the risk of harm to the security and foreign policy interests of the United States", and stated that they wished to make amends through the payment of restitution.

Mon, 12/23/2013 - 16:50 | 4271681 post turtle saver
post turtle saver's picture

yes, that was an excellent way to get CIA backdoor access into Chinese guidance systems... and if the opportunity presents itself, we'll do it again, act all shocked, then make it up for everyone involved out of the black budget

Mon, 12/23/2013 - 14:38 | 4271345 NEOSERF
NEOSERF's picture

Feels like the Japanese in 19080s all over again...

Mon, 12/23/2013 - 13:09 | 4271024 Dr. Engali
Dr. Engali's picture

Globalized money laundering 101. Just buy shit everywhere with credit, shuffle money from point A to B to C then back to A,  toss in some income from some unsavory practices and voila...nobody has any fucking clue what is going on.

Mon, 12/23/2013 - 13:11 | 4271030 Bay of Pigs
Bay of Pigs's picture

None of this passes the Schmell Test Doc...

Mon, 12/23/2013 - 13:10 | 4271026 kliguy38
kliguy38's picture

they're moving those "dollar reserves" back home fast

Mon, 12/23/2013 - 13:12 | 4271037 buzzsaw99
buzzsaw99's picture

japan 1990 redux

Mon, 12/23/2013 - 13:16 | 4271044 BudFox2012
BudFox2012's picture

Some drunk guy in Shanghai bought all of Detroit for $15 on ebay last Saturday night, so that 500% number might be a bit misleading.

Mon, 12/23/2013 - 13:23 | 4271059 Colonel Klink
Colonel Klink's picture

Who better to rebuild crumbling US cities and infrastructure than those who build it for no reason?  God knows the US government can't rebuild shit except crumbling bank balance sheets.

/sarc

Mon, 12/23/2013 - 13:25 | 4271070 buzzsaw99
buzzsaw99's picture

they invest in empty cities everywhere

Mon, 12/23/2013 - 13:38 | 4271117 DeadFred
DeadFred's picture

I imagine the troops that took back Tienanmen Square would have little problem dealing with the Detroit drug dealers.

Mon, 12/23/2013 - 16:19 | 4271616 zerozulu
zerozulu's picture

Japanese did the same thing in 90's when they had money. But Chinese are different. There is  a delicatessen run by a Chinese couple across the street and I see them arguing with customers all the time for pennies.

Mon, 12/23/2013 - 13:24 | 4271063 kevinearick
kevinearick's picture

The State of Higher Education:  Money, Inflation, & War

America is becoming like Russia, Russia is becoming like America, and young people are beginning to occupy their own minds again, globally. The poles are discharging. Big surprise, a civil contract, and the depravity of its derivatives, is a poor substitute for a real marriage.

Property and income are like training wheels. You are better off taking your kid to a grassy slope and skipping the whole make-work exercise. Over time you will find that individual rights come with individual responsibility. The latter has always been scarce and the former has always been coveted, by a herd on ever-more expensive tricycles, playing the entitlement lottery.

Property chasing money and money chasing property can only travel in one direction, repeating the past. Of course the statists enforce the status quo with busy work until they can’t. Place a mirror between them and be on with your business.

If printing money and inflating real estate do not solve any of the problems that promoters pretend to address, why do they do it, unless they are hammers looking for nails? The problem with government, deferred responsibility, is that it must be subsidized with economic slavery, which is why it always results in money, inflation and war.

It’s not called game theory by accident. Everybody does it is a stupid argument for gravity, but that is higher education. The parties to civil contract build their own prisons and enslave each other with false assumptions. Government cannot preempt you unless you accept its assumptions, see the world the way it sees the world.

After all the talk, legacy is still stuck on P-M-P, and the majority is still stuck on M-P-M, one being the derivative in time of the other, depending upon self-serving perspective. And both assume that labor has been eliminated, or at least structurally marginalized, with automation, both caught in bipolar reduction anxiety. P-M-P meet M-P-M.

Agency simply delivers the M-P-M perception with declining interest rates, to fatten the herd, and whamo-bamo, reverses the adjustments to deliver P-M-P, breaking a lot of necks, simulating labor with P/M or M/P. At the end of the empire cycle, the M-P-M fuse is lit and blows up P-M-P. What you want to do with a two phase short on three phase is up to you.

“If you lend money to any of My people who are poor among you, you should not be like the moneylender to him; you shall not charge him interest…you have made it a den of thieves…carry neither moneybag, knapsack, nor sandals; and greet no one along the road…And remain in the same house, eating and drinking such things as they give, for the laborer is worthy of his wages. Do not go from house to house.”

I got my first place for 20 cents on the dollar. I got my second for 5 cents. The US dollar is now worth 2 cents. There are still plenty of us out here that do not make decisions based on fiscal or monetary policy, and are quite capable of making the necessary adjustments to filter out both in real time.

The cream rises to the top, and an A on a Bell Curve twisted to the purpose from Stanford isn’t going to get you there. America is not the end, you have access to a global communication stream, and other currencies are coming online. You don’t need a slide rule; those who consume M-P-M or P-M-P project them. I/O is I/O.

The empire is just an amplifier. Its code allows the Nazi operators with no skills to target subpopulations anywhere on the planet at any time, but the cost of boiling the frogs more uniformly is fewer frogs populating the pan, because fewer are happy with different colored Nike tennis shoes, or ipads with custom covers. They can get on a jet, but they cannot get out of the box. The event horizons are implicitly managed with empire discounting. If labor pulls out, they implode. Automation has simply increased efficiency, how fast errors propagate.

P&M reboot with each new currency regime, and replace labor with each artificial cycle, until they have locked each other into implosion, but there is always an exit for you, if you did not accept their assumptions, if you can see what they do not. If you think about it, I have given you all the code you need to build whatever you want to build. Just put a dress on it.

When you are young, life is a marathon, but the empire tells you it’s a sprint. As you get older, life becomes a sprint, but the empire tells you that the race is over. In reality, you are only competing with your better self. Old-timers do not require a computer to recognize love. Get married, have your children and faith in your marriage will take care of the rest.

Your spouse is the future. Government is the past. Privacy and trust begin at home. The public trust is a distant derivative. Take care of each other like you life depends upon it, because it does. Teach your children or someone else will. Adjust your distance accordingly. It takes two to climb.

Respect marriage, or face tyranny. Labor responds to an artificial crisis until it doesn’t.

Merry Christmas

Mon, 12/23/2013 - 20:50 | 4272188 overexposed
overexposed's picture

One of the most beautiful comments I've read on here in a long time.  My hat's off for a job well done, Kevin!

Mon, 12/23/2013 - 13:27 | 4271071 falak pema
falak pema's picture

feed the FIRE asset ramp while your banks run short of liquidity.

Oligarchs of the world as long as you stay united the CBs protect you...until...the great white icy giant looms in the shadow.

Mon, 12/23/2013 - 13:30 | 4271080 Diplodicus Rex
Diplodicus Rex's picture

The Chinese are not "investing". They are simply "spending" their accumulation of (soon to be worthless) IOUs on real, hard, tangible assets. I have to say, I can't blame them. In previous years they swapped their hard won labour for paper promises. Now they're simply making good on those promises by taking assets in lieu.

Mon, 12/23/2013 - 13:30 | 4271091 jballz
jballz's picture

Step 1- overextend country

Step 2- profIt

Step 3- foreclose on country

Step 4- profit

Step 5- rent foreclosures to previous owners.

Step 6- profit

I'm sure I missed a couple profit steps there but fuck it. I get the picture.

Mon, 12/23/2013 - 13:52 | 4271187 ZeroPoint
ZeroPoint's picture

The problem is there is no step 7. There is no where to go but down now.

Mon, 12/23/2013 - 16:26 | 4271629 jballz
jballz's picture

 

Were the case, they would just start selling enough of their own mothers to get a bubble going, set up a swaps and default swaps market on their mothers, and profit.

Lots they haven't tried yet...

Mon, 12/23/2013 - 13:42 | 4271135 pitz
pitz's picture

Just in time for the hyperinflation (hyperinflation, of course, destroying the value of most property!!!). 

Mon, 12/23/2013 - 13:51 | 4271167 Diplodicus Rex
Diplodicus Rex's picture

It will destroy the price of the property. The value will remain the same.

Mon, 12/23/2013 - 13:45 | 4271140 ejmoosa
ejmoosa's picture

My friends and I always thought it funny that there was a concern over the trade deficit.  After all, those dollars represented pent up demand for Future goods and services back here in the US of A.

And after watching the Japanese buy high and end up selling low, well that was ok with us.

But then our government destroyed our economy, and the Chinese and others are coming in and buying up gold and other real properties at the lows....

The joke's on us if we don't turn this nation around, and rapidly.

Mon, 12/23/2013 - 14:05 | 4271232 FredFlintstone
FredFlintstone's picture

The joke may be on whoever thinks they can buy and HOLD our assets.

Mon, 12/23/2013 - 15:49 | 4271535 GoldForCash
GoldForCash's picture

Exactly

Mon, 12/23/2013 - 13:45 | 4271142 U4 eee aaa
U4 eee aaa's picture

So the Fed's money printing has finally come home to the US. Every other pot in the world is full and the liquidity has reached the shores and will now start filling the only pot left. Inflation has returned

Mon, 12/23/2013 - 13:55 | 4271199 Darkside
Darkside's picture

Worthless YUAN's for brick and mortar smart fuckers

Mon, 12/23/2013 - 13:57 | 4271200 Darkside
Darkside's picture

Worthless YUAN's for brick and mortar smart fuckers

Mon, 12/23/2013 - 14:00 | 4271215 americanspirit
americanspirit's picture

In the 1980s Japanese investors ( mainly banks) spent billions buying up Western US land with water rights. I haven't kept track of that situation but suspect that a lot of that property has since changed hands. My guess is that it has not reverted to US ownership.

This article makes me wonder how much Chinese money is going into prime US farmland. If the Chinese control enough US farmland and water rights - guess what. They then own the means of food production.

As a side note, the Chinese own @ 40% of the biggest wind farm in Texas, and that company has used the states power of eminent domain to take land for the power lines that transport the electricity to major Texas cities. So, let's review here. US Farmland. Check. US Water. Check. US Electricity. Check. US Treasuries. Check. US Gold. Check. Would that be close to Check Mate?

Mon, 12/23/2013 - 14:02 | 4271222 FredFlintstone
FredFlintstone's picture

Nope, 310M armed and pissed will throw that yoke off real quick.

Mon, 12/23/2013 - 14:38 | 4271334 savedbyfreethought
savedbyfreethought's picture

What I don't understand is why there always seems to be an idea that the Chinese buying properties outside China do so because they are following some sort of order issued by a centralised Chinse conspiracy group chaired by Dr. Fu Manchu in an attempt to take over the world.

That cannot be further from the truth, the truth is China is the biggest shit hole in the world and the Chinese do what anyone would do: get the hell out of there. So they buy assets where there is protection for private property.

If this is in fact about China trying to gain supremacy, then why invest in the adversary i.e. US where your properties might be seized at anytime by a foreign soverign ? Why not spend all that money on itself like infrastructure, healthcare or more national scientific projects. The reason is the Chinese themselves think China is a lost cause and their purchases are motivated not by some romantic nationalism but are calculated moves intended to preseve their own individual wealth.

Mon, 12/23/2013 - 14:34 | 4271317 reader2010
reader2010's picture

What had happened to the properties owned by the American Japs right after Pearl Harbor? I bet Chinks never bothered to learn the lessons from our history. 

Mon, 12/23/2013 - 14:39 | 4271338 NEOSERF
NEOSERF's picture

They have to have somewhere to put all those people.  Why don't we sell them Detroit at half off...probably would be the most productive city in America by 2025 and competing for the next Olympics....

Mon, 12/23/2013 - 15:31 | 4271474 22winmag
22winmag's picture

Those commercial properties are going to be knee deep in piss, shit, and corpses when they are turned into detention camps. Not a great investment.

 

Oh wait... do you really think it's going to come to that? A rifle looming behind every blade of grass.

Mon, 12/23/2013 - 15:45 | 4271531 GoldForCash
GoldForCash's picture

Behind every bush

 

Mon, 12/23/2013 - 15:45 | 4271533 Yenbot
Yenbot's picture

Autarchy. Is. The. Answer.

Mon, 12/23/2013 - 17:26 | 4271751 monad
monad's picture

Are foreigners allowed to buy real estate in China?

Mon, 12/23/2013 - 19:58 | 4272087 YuShun
YuShun's picture

Yes, an American can buy a condo in most modern developments,
and someone from Europe or Latin America might have fewer
restrictions. 

 

Mon, 12/23/2013 - 18:44 | 4271917 SmittyinLA
SmittyinLA's picture

the real wealth in America is in water rights, not stuff you can build, the Smithfield Farms purchase was a massive water rights buy 

Mon, 12/23/2013 - 19:39 | 4272037 Seer
Seer's picture

Ah, Food, Shelter and WATER...  Never, and I repeat, NEVER, lose touch with what these REAL fundamentals are!

Mon, 12/23/2013 - 19:07 | 4271960 shinobi-7
shinobi-7's picture

Or how to transform useless capital into real assets.

Mon, 12/23/2013 - 19:37 | 4272033 Seer
Seer's picture

Like I've been saying, that the Fed is buying up stuff really isn't that bad: when they default it's Debt Jubilee; I'm not thinking that by selling to outside "investors" this is going to be an option.

Mon, 12/23/2013 - 21:23 | 4272276 orangegeek
orangegeek's picture

Japan did the same in the 80s.

 

All the cash in the world to buy, but no cashflow or acumen to operate these commercial properties profitably.

 

Chinese will be the bag holders like the Japanese were in the 1980s.

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