China’s Property Developers Follow The Money As Wealthy Customers Head Abroad

    Chinese companies are embarking on a wave of luxury hotel and residential projects across the world as they court China's jet-setting property buyers.
    A rendering of a Chicago riverfront luxury hotel and residential project being developed by Dalian Wanda.
    Jing DailyAuthor
      Published   in Finance

    A rendering of a Chicago riverfront luxury hotel and residential project being developed by Dalian Wanda.

    As China’s wealthy head abroad in record numbers for vacations and trips to buy international real estate—often for both at the same time—top Chinese property developers are hot on their heels with an extensive and growing list of global luxury residential and hotel developments.

    Earlier this week, news broke that China’s largest shopping center developer Dalian Wanda is set to raise $3.7 billion for its Hong Kong IPO, making it the biggest Hong Kong’s stock exchange has seen since 2010. While the company’s early success has been built mainly on its retail, entertainment, and hospitality complexes across China, its vision for the future is decidedly global with a close eye on rich Chinese travelers.

    The firm has demonstrated ambitions to become the largest commercial real estate developer in the world as well as the world’s largest five-star hotel owner by 2015 with a number of high-profile international luxury projects. Headed by Wang Jianlin, who is currently in a battle with Jack Ma for the title of China’s richest person this year, Dalian Wanda’s plans to build hotels in 100 Chinese cities over the next year are just the beginning. The company also intends to own over 150 luxury hotels in total by 2018, with many in locations such as Europe, the United States, and Australia.

    The company is in the midst of a plan that is being adopted by many of China’s top property developers as their main customers in China become increasingly globalized. China’s total number of outbound tourists exceeded 100 million this year, according to a recent announcement by the China National Tourism Administration. Whether traveling for business, pleasure, or a combination, one main factor is a part of many trips abroad by China’s well-heeled: real estate.

    With a shaky real estate market at home and a penchant for investment in hard assets, China’s rich have been scooping up luxury homes, apartments, and condos for cash everywhere from Sydney to Los Angeles. They see many benefits to buying, which include a comparatively stable investment, a place for their children to live while attending school abroad, and perpetual legal rights to the property that pass down to the next generation. In addition, limits on buying in China aimed at calming worries over a real estate bubble make it difficult and costly to buy a second or third home on the mainland.

    As a result, Chinese companies that struck it rich at home are rapidly moving into the world’s top cities for Chinese visitor numbers and real estate purchases. Details were revealed today about Dalian Wanda’s $900 million investment for a 90 percent stake in an 89-story luxury residential and hotel complex on Chicago’s riverfront that will become the city’s third-largest tower after the Trump and Willis towers. Also in development for the company are the tallest residential building in Western Europe on the Thames River in London, a project in Beverly Hills, California that the company recently purchased land for, and a $1 billion beachfront Surfers Paradise hotel on Australia's Gold Coast.

    Dalian Wanda's planned development in Australia's Surfers Paradise.

    Another major property developer with global ambitions is state-owned Greenland Holding Group, which has pumped around $20 billion into 13 cities in 9 different countries since 2013. In July 2013, the company purchased a site in Los Angeles that it’s developing into a complex with two high-rise towers that will house a boutique hotel and residential space. It also owns a 70 percent stake in the 8 million-square-foot Pacific Park (formerly known as Atlantic Yards) mixed-development project in Brooklyn, which will contain residential, retail, and office space. Chinese property developer Xinyuan Real Estate had originally paved the way for Chinese developers in Brooklyn with a luxury residential development in Williamsburg that it became a part of in 2012. Units are already on the market, with prices going for $710,000 for a one-bedroom and a $1.53 million for a two-bedroom.

    A rendering of Greenland Holdings' planned Los Angeles development.

    Major new players are quickly joining in. China Vanke Co., mainland China’s biggest listed homebuilder, announced its first international project in February 2013, when it inked a joint venture to develop two luxury high-rise condo towers in San Francisco. In February of this year, it announced its second U.S. investment with a statement that is jointly developing a 61-story luxury condominium project in Midtown Manhattan. Company president Yu Ling has also noted Vanke’s interest in developing in Boston thanks to its large Chinese community.

    Chinese investors are also making big-ticket purchases of luxury hotels to benefit from their established brand names. The most newsworthy over the past year was the Anbang Insurance Group’s agreement to pay $1.95 billion for the iconic Waldorf-Astoria hotel in New York. In addition, Shanghai’s Jin Jiang recently bought the French Louvre hotels group, while Dalian Wanda has also expressed the intention to purchase international hotels in locations such as New York.

    As Chinese companies rush abroad to court China’s traveling real estate buyers, the question now remains as to whether or not they will find the same success abroad that they had at home. This is especially relevant when it comes to mainland Chinese hotels, which will have to compete with international brands on their home turf. That’s why many Chinese companies such as Anbang are opting to purchase a storied name and allowing the original company to stay in charge of management—for example, a 100-year management contract with Hilton is part of the Waldorf-Astoria deal. Dalian Wanda, however, plans to use its own brand name for many hotels in hopes that it will have good name recognition with Chinese travelers heading abroad for their buying sprees.

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