Flying into China’s real estate market as Chinese investors pull back from the US

Over the past few years, no group of investors have made a bigger mark in the US Real Estate market than the Chinese. From Chinese airline turned global conglomerate, HNA, to insurance company turned investor, Anbang, as well as conglomerate Wanda, these Chinese investors have been buying up some of the biggest trophy properties in the United States including the Waldorf Astoria, 245 Park Avenue and other large office and hotel properties. These investors were scooping up prize properties across the country and partnering with some of New York’s most established companies.

The Chinese government, concerned about potentially risky overseas investments and capital outflows, began to enact capital controls in November 2016. Chinese investment in the US began to slow but large acquisitions continued, such as HNA’s $2.21 billion purchase of 245 Park in May 2017.

However, the clampdown as come to a head in the past few weeks. Anbang was seized by the China Insurance Regulatory Commission for at least a year on February 23rd following the indictment of the firm’s chairman, Wu Xiaohui, who was charged with financial fraud, as reported by the Wall Street Journal. HNA is facing a debt crisis with $20 billion of bonds expiring in the next two years. Their credit profile has been lowered from b to ccc+ by S&P Global and the group has turned to employees to raise debt. In February 2018, HNA put 245 Park, the crown jewel of its estimated $14 billion real estate portfolio, for sale along with other US assets for $4 billion.

From March 11th to 18th, a group of 30 CBS students will meet with real estate companies in Hong Kong and Shanghai. While none of these aforementioned tumultuous and notoriously secretive companies have agreed to meet with us, there is an impressive line up of investors, developers and operators that will talk to our group about investments happening within Asia and hopefully offer an insider’s perspective on foreign investment crackdown.

Robin Lore ’19

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