(March 16, 2017)

Meet the Chinese investors, developers and lenders fueling Bay Area projects – San Francisco Business Times

The Bay Area’s largest, boldest and most costly real estate projects have attracted a slew of big-name Chinese developers and investors over the past few years.

Vanke, Oceanwide, Greenland Holdings have all taken a bite of the Bay Area’s red-hot development market.

These and other Chinese investors and developers are tackling ambitious, capital-intensive projects with long timelines that have scared off some local and national developers.

“It’s grown exponentially,” said Bruce Pickering, executive director for the Asia Society Northern California about Chinese investment in Bay Area real estate.

Chinese real estate investment in the Greater Bay Area, including Silicon Valley, grew from $930 million in 2012 to $2.2 billion in 2016, according to a report this week from Cushman & Wakefield.

While the Bay Area has seen a flood of investment, it pulled in only 15 percent of Chinese investment in real estate nationwide, way behind New York, which pulled in 46 percent, according to Cushman & Wakefield.

The Bay Area investment includes Oceanwide Holdings’s massive mixed-use project across from the Transbay Transit Center in San Francisco. The $1 billion-plus Oceanwide Center includes 1 million square feet of office space, a 170-room hotel and 410,000 square feet of residential space in one building, and 379,000 square feet of residential space in another.

Outside of San Francisco, Chinese developer Greenland USA partnered with Ping An Trust, Agile Group and Poly Sino Capital Ltd. to buy the development site at Oyster Point in South San Francisco where 2.25 million square feet of office and R&D space is entitled. The $1 billion investment will be built out over many years.

Xinyi McKinny, Cushman & Wakefield’s senior managing director for China direct investment in the Bay Area and Los Angeles, said the Bay Area was on Chinese investors’ radar for many years, but it took time to understand the entitlement and development risks before they felt comfortable diving in.

She said large Bay Area projects that were deemed too big, risky and complex by some U.S. firm are small in comparison to the scale at which Chinese developers work. In China, it’s not unusual for a developer to sell hundreds of units in a day when a project hits the market. Here, by contrast, absorption is usually four to six units a month.

Pickering agreed that the Chinese are undaunted by building massive projects. Chinese developers and investors working in the Bay Area are “sophisticated and have done their due diligence,” he said.

One major reason that Chinese money has flooded the commercial real estate market is a 2012 change in Chinese regulation that allows the country’s insurance companies to park money in overseas real estate markets.

But McKinny said the flow of deals in the Bay Area and the rest of the U.S. is slowing in 2017 because of restrictions on capital outflows imposed by the Chinese government. Chinese officials slammed the brakes on outflows because of worries about both risky investments and corruption.

Pickering of the Asia Society said that he expects the restrictions to soften because there’s a lot of pressure within China to invest abroad, and news reports indicate that the government will ease up on larger insurance firms’ investments.

But even if the flow of money returns, there are dark clouds that could put a crimp on Chinese investment in Bay Area real estate.

“The bigger question is the political question,” said Pickering. “If the Trump administration gets us into a trade war (with China), everything changes.”