In recent posts on this blog, we’ve been discussing the findings of a recent study released by the National Association of Realtors showing that Texas is among the most active markets for foreign investment in commercial real estate.
Now, a new report from Cushman & Wakefield presents findings that Chinese investors were the largest single group of foreign investors in commercial real estate in 2016. Many of the Chinese transactions are high-value deals, amounting to over $1 billion.
According to the report, Chinese investment in commercial real estate is concentrated on the east and west coasts, while activity in Texas is relatively slower. As we already noted on this blog, though, Texas is a thriving market for other foreign investors in commercial real estate.
As we mentioned previously, foreign investors present unique challenges that sellers need to be aware of when entering into a commercial real estate transaction, and purchase agreements and transactional documentation needs to be carefully negotiated and drafted to protect the seller from these risks.
One of the challenges Chinese commercial real estate investors have been facing is the Chinese government’s passage of stricter rules on foreign investment. Earlier this year, the government implemented strict new lending rules requiring Chinese investors to disclose the purpose of foreign investments. Prior to that, the government set a limit on overseas transfers of $50,000 in an attempt to slow down overseas investment. These limitations have caused significant changes in how Chinese investors pay for their investments, and this in turn has affected the risks sellers face in these transactions.
In our next post, we’ll continue looking at this issue and the importance of expert legal advice and advocacy in this area.
The Real Deal, “The death of the all-cash Chinese buyer–and what it means for NYC banks,” E.B. Solomont, March 27, 2017.