Chinese Dumped $1 Billion of U.S. Real Estate in Third Quarter

Chinese Dumped $1 Billion of U.S. Real Estate in Third Quarter
05/12/2018 , by , in INTERNATIONAL

Chinese investors unloaded more than $1 billion in U.S. real estate in the third quarter, extending their recent retreat from hotels, office buildings and other foreign property under pressure from Beijing to reduce debt and curb money sent abroad.

Insurers, conglomerates and other big investors from China sold $1.05 billion worth of U.S. real estate in the third quarter, while purchasing $231 million of property, according to data firm Real Capital Analytics.

That was the second straight quarter in which Chinese were net sellers of U.S. commercial real estate. The second quarter marked the first time these investors sold more U.S. property than they bought during a quarter since 2008.

Chinese investors have spent tens of billions of dollars over the past five years to acquire U.S. real estate or land, favoring major metro areas like New York, Los Angeles, San Francisco and Chicago. Chinese buyers sometimes paid record prices to win trophy assets, punctuated by Anbang Insurance Group’s $1.95 billion acquisition of New York’s Waldorf Astoria in 2015—the highest price ever for a U.S. hotel.

While Chinese buyers never represented more than a fraction of the buying power in any U.S. market, these companies often made headlines with the steep prices they were willing to pay, which helped push values higher in certain segments of the market.

But rising corporate debt levels and concern over currency stability led the Chinese government to tighten capital outflows and clamp down on their companies’ overseas acquisitions. Chinese investors scaled back their purchases and unloaded foreign assets.

More recently, trade tension between Beijing and Washington, D.C., has sparked additional selling, even though many Chinese are still interested in overseas projects, and the two governments reached a tentative truce this weekend.

“This has to do more with a change in how capital is permitted to behave rather than Chinese investors saying ‘I don’t like the U.S.’,” said Jim Costello, senior vice president at Real Capital Analytics.

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