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Chinese Backing Away from American Real Estate

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Chinese real-estate investors have become synonymous with real estate in America. A number of Chinese tourists come just to scout New York’s prime real estate, but that trend has completely reversed, in part because of pressure from Beijing.

 

Chinese insurers, conglomerates, and other investors have turned net sellers of U.S. commercial real estate for the first time in 10 years, according to The Wall Street Journal. They have spent tens of billions of dollars to acquire a wide array of large properties.

 

Things appeared to be taking a turn after a second quarter in which Chinese investors sold $1.29 billion worth of U.S. commercial real estate while purchasing only $126.2 million of property, according to data firm Real Capital Analytics. The occasion was the first time that these investors were net sellers for a quarter since 2008, according to The Wall Street Journal.

 

The more than $1 billion in net sales reflects how much the Chinese government’s attitude toward investing overseas has changed in recent months.

 

Chinese investors started buying up real estate years ago when Beijing officials loosened restrictions on foreign investment. They quickly owned notable properties in places like Los Angeles, San Francisco, and Chicago with high-profile acquisitions, including the $1.95 billion purchase of the Waldorf Astoria, the highest price ever paid for a U.S. hotel, according to The Wall Street Journal.

 

The Chinese government started to crack down on certain types of outbound investment that include real estate in part to help stabilize the currency, forcing a reversal of the real estate trend. Chinese companies like HNA Group and Greenland Holding Group are unloading prize properties to repay debt and to comply with regulatory and market pressures from home, analysts said.

 

“I was shocked,” said Jim Costello, senior vice president at Real Capital Analytics. “They really curtailed their buying and stepped up sales.”

 

Analysts say that increasing tensions over trade and national security between China and the U.S. have further chilled investments.

 

“The China-US outbound cross-border real estate climate has been negatively impacted by the geopolitical climate,” said David Blumenfeld, a Hong Kong-based partner at Paul Hastings LLP.

Likely sellers include Anbang Insurance Group, which was taken over by Chinese regulators in February and whose chairman, Wu Xiaohui, was convicted of fraud and abuse of power. Anbang may sell some of its U.S. hotels, but it hasn’t made any deals and is renovating the Waldorf in New York.

 

“The company is still in the process of reviewing overseas assets,” Shen Gang, an Anbang spokesman said. “We currently do not have specific asset optimization plan, nor a specific timetable.”

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