Fallout from Waldorf Astoria buy continues as foreign money floods Manhattan

The Waldorf Astoria in New York's stunning record deal may only be the tip of the iceberg, as foreign money, particularly from China, seeks out safe havens, such as the prized assets that dot the Manhattan landscape.

As Steven James, president of Manhattan brokerage for real estate firm Douglas Elliman, told China Daily, "The Waldorf Astoria is obviously a very high profile, iconic property, so that's going to get a lot of press. General wisdom says that this real estate market is going to continue to rise. For a foreign buyer, if they're going to invest in a city they look to see if it's a safe haven for money. Clearly, New York is that spot and [investors] see the value there."

The deal, which was announced Monday, could be a game changer for the city’s commercial real estate market, writes Real Estate Weekly. "While Chinese investment in Manhattan office buildings has grown exponentially over the past two years, insurers have been notably absent. The largest Chinese investors in New York City—China Vanke, Greenland Group, Fosun Group and Xin Development Group—are all real estate investment and development companies."

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It appears that the Chinese government's easing of restrictions has very much to do with the somewhat suddent influx of money. Real Estate Weekly goes on: "Insurance companies have been reluctant to invest abroad because government regulations have restricted capital outflows and the domestic market offered high returns, but both are starting to change. In 2012, the Chinese government started allowing insurers to invest abroad and, this February, it raised the share of their balance sheets that insurers can invest abroad from 5 to 15 percent, giving insurers more leeway to spend on U.S. real estate."

In addition, the deal reportedly marks not only the first arrival of a Chinese insurer into the U.S. real estate market, but is also the third overseas real estate acquisition by a Chinese insurance company,

Some, however, liken China's buying spree to that of Japan's back in the 1980s. As ECNS writes, "While high-profile transactions like the Waldorf Astoria deal allow Chinese companies to quickly make a name for themselves in the global arena, some observers are concerned that history could be repeating itself. They liken recent Chinese real estate acquisitions to Japan's buying spree of famous US properties in the 1980s, which included Mitsubishi's purchase of Rockefeller Center. Today, many see this wave of Japanese spending as symbolizing the peak of the country's economic bubble."

But it's not just China money. Today we learned that Hawaii-based commercial real estate investment firm the Shidler Group acquired the Fairfield Inn & Suites in Midtown New York for $69.6 million. The 239-room hotel at 325 West 33rd Street opened last year. Spartanburg, S.C.-based OTO Development had owned the site since paying $21.9 million for it in 2010.

 

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