Posted on 07/04/2005 7:01:52 AM PDT by TigerLikesRooster
Saturday July 2, 6:33 AM
Reuters Summit-Chinese may soon park money in U.S. buildings
NEW YORK, July 1 (Reuters) - Today, it's oil and washing machines, but tomorrow, they may take Manhattan.
That's how U.S. real estate experts view the bids by Chinese companies to buy Unocal Corp. , the U.S. oil company, and Maytag Corp. , the iconic American maker of washing machines and other appliances.
This aggressive interest in buying U.S. companies could signal broader investment from China in the United States that would include land and buildings in major American cities, real estate experts said this week at the Reuters Real Estate Summit in New York.
"I don't think it's in the near term, but three or four years down the road, it wouldn't surprise me," said Owen Thomas, Morgan Stanley managing director and the head of its real estate arm. ADVERTISEMENT
Real estate magnate Sam Zell, chairman of Equity Office Properties Trust and Equity Residential , said he wouldn't be surprised if Chinese real estate investment somewhat mirrors Japanese investment in U.S. assets 20 to 30 years ago.
"It's very likely to be initially in companies and, eventually in real estate, just like the Japanese in the '70s and '80s," Zell said.
The value of Japanese investment in the United States ballooned to $21.85 billion by 1985 from $4.24 billion in the 1970s, boosted by the strengthening yen and trade quotas and tariffs, according to the University of British Columbia's Centre of Japanese Research.
By 1999, Japan's stake in U.S. real estate had soared to $45.6 billion.
SHADES OF 1988
Japanese investors bought U.S. manufacturing companies, including transportation equipment, primary metals, electronic equipment, industrial machinery and rubber products, such as Bridgetown's acquisition of U.S.-based Firestone in 1988.
In fact, 1988 appeared to be a watershed year, when Japanese investors bought 225 U.S. companies, according to the National Clearinghouse for U.S.-Japanese Studies at Indiana University.
They also bought real estate.
And while they didn't buy big-name oil companies, they did acquire their buildings, including The Exxon Building and the Mobil Building in New York. Japanese investors also bought other high-profile buildings, including Arco Plaza in Los Angeles and 666 Fifth Avenue in New York.
In 1989, Japanese investors took a stake in Rockefeller Center, an Art Deco crown jewel in Manhattan's constellation of landmarks.
MONEY FLOWS FROM EAST TO WEST
But the American real estate experts agreed that before Chinese investors become U.S. landlords, the Chinese have to put in place systems for pooling money and moving it.
"I can't speak to why they haven't been here to date although I suspect it has a lot to do with the trickle down of money and the creation of pension funds, etc., that evolve into investable funds," Zell said.
As far as moving money, that is starting to happen. For example, Bank of America Corp. has agreed to take a 9 percent stake in China Construction Bank , China's third-largest lender. Chinese banks also may be getting into real estate investment by lending money for investment in U.S. real estate.
"I've heard anecdotally about Chinese banks looking at mortgage lending in the United states and it would not surprise me at all to see some equity investment at some point," Morgan Stanley's Thomas said.
Others could be taking the back-door approach.
"Our view is we're going to see a lot more. It's under-the- radar-screen stuff," said Brett White, CB Richard Ellis chief executive.
Capital that moves from China often moves along family lines.
"You'll see wealthy U.S.-based Chinese purchasing properties here. Our assumption has always been that there is a capital flow from other countries to support those people," White said.
But a full-fledged Chinese investment in U.S. real estate is not that far in the future, White said.
"A couple of years" is his best guess for when it will take shape.
With respect to either U.S. investment in China or vice versa, China has the ears of all investors, Zell said.
"China is some place you can't afford not to be aware of and you can't afford not to understand," he said.
Real esate purchase seems more like corrupt crooks of China sending out their ill-gotten money to U.S. for safe-keeping. When China goes south, watch these folks showing up in America, proclaiming their love for freedom and democracy. In reality, they only love their money.
Ping!
It worked pretty well for the Japanese.
Bingo. It took Bridgestone more than 20 years to turn a profit from their Firestone investment. Ditto the golf courses, hotels, etc. they bought that are still in the red.
I've got that sinking feeling. I wouldn't sell to the Chicoms if my life depended on it. What they own, they can control.
I don't think the Chinese have THAT much money, but if they invest in US real estate, then it's REALLY good news for the US and for the prospect of peace between us. I can't imagine tha the Chinese are going to engage us militarily if they've got their money in US real estate. It would be very easy to simply seize it.
You make an excellent point. But if I was a Chinese Entrepreneur I'ld want to invest in something that the Chinese Govt couldn't possibly confiscate - which would act to strengthen property-rights back in China.
Ill-gotten? Have you been to Target or Wal*Mart lately? China is getting our US dollars fair and square, from the profligate consumerism of American citizens.
On the back of other Chinese who do backbreaking work, corrupt officials skim their savings via financial scams, and relocate their money to U.S. There are many Chinese who earn their money fair and square, and there are privileged communist crooks who steal their money, using their connection, and resorting to myriad of scams.
Ah, good point.
LOL. Amen. The Iranians STILL have assets they're trying to recover . . . 25 years later. I say let the Chinese buy all they want . . . then we'll seize their assets the next time a Tianamen Square comes up.
come on sucker - 30 Rock wants another buyer and the Pebble Beach Golf course was an example of 100 million down the drain. American commercial real estate is not fro the new rich, it is a sheep shearing waiting to happen.
they have 650 billion in US currency in their reserves.
Maybe, but they aren't going to invest it all in US real estate, and even if they did, I doubt it would do much to the valuations. The total value of US homes alone exceeds $12 trillion. And that doesn't even include commercial real estate.
The chinese will not invest in US real estate. They learned from the Japanese what not to do. They want american companies with all the attached patent rights, proprietary knowledge and other assets to increase their economy.
They will not buy US RE unless their is oil or minerals on that RE.
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