Monthly Archives: December 2013

Chinese investors turn to US commercial realty

Chinese businessman - China Elite FocusChinese investors, the second-biggest overseas buyers of US residential real estate, are building up portfolios of US commercial property as they look for new avenues of diversification. Chinese entities announced more than $5.89 billion in projects in January-October, nearly six times the $996 million for all of 2011 and 2012 combined, data from New York-based consultancy Rhodium Group show.
“There is a lot of upside,” said Thilo Hanemann, Rhodium’s research director. “We are at the beginning of a structural increase of Chinese investment in US commercial real estate.”
Greenland Holding Group Co completed a deal that will give the Shanghai-based developer a 70 per cent stake in Forest City Enterprises Inc’s Atlantic Yards, a 22-acre commercial and residential project in Brooklyn, New York. The deal, which is expected to require $4.8 billion worth of investment over eight years, is the largest property transaction by a Chinese company in the US.
China’s push into US property is underpinned by declining investment returns at home, a growing desire by wealthy individuals and developers to diversify their holdings overseas, and property companies looking to capitalize on offshore migration.
“Some investors want to diversify their assets, and some are looking for different growth opportunities,” said Julien Zhang, international director in Beijing for property consultancy Jones Lang Lasalle, which is advising three Chinese conglomerates on property deals. “Others want to learn how to enter mature and developed markets.”
A rebound in US real estate pricing, tight inventory in major cities, and continued low interest rates also are attracting Chinese buyers, said Gary Locke, the US ambassador to China. Locke was speaking at a forum in Beijing sponsored by the US Embassy to promote Chinese investment in US property. Chinese investment in the US has surged to $18.5 billion over the last two years, more than the combined total of the previous 11 years, Locke said.

“Chinese investors are now looking to purchase entire luxury shopping malls in Los Angeles, Las Vegas and New York City”, said Pierre Gervois, Publisher of the Shanghai Travelers’ Club magazine. “As the new generation of affluent Chinese consumers prefer to buy luxury goods overseas, Chinese investors know that it’s now better to invest in luxury retail in the U.S. rather than in China, where foreign brands have opened too many deserted outlets” Gervois added.
Chinese nationals bought more than $8.1 billion worth of real estate in the year ended March 31, representing 12 per cent of the estimated $68.2 billion of domestic property purchased by overseas nationals and second only to Canadians, according to a survey by the National Association of Realtors.
“Real estate is finally becoming a global industry and you will see capital flows on a cross-border basis, just like every other investment class,” said Rob Speyer, co-chief executive of Tishman Speyer Properties LP, which partnered in February with China Vanke Co Ltd to build a $620 million apartment project in San Francisco.
Speyer, whose company is also developing commercial, residential and retail projects in the Chinese cities of Shanghai, Chengdu and Tianjin, said he courted Vanke’s Chairman Wang Shi for more than two years, and inked their deal only 45 days after first introducing the project to him.
Not everyone is convinced that Chinese investment in the US property market will continue uninterrupted. Other options for expansion include Europe, Australia and Singapore, which account for about two-thirds of offshore Chinese real estate investment, according to Jones Lang Lasalle.
Zhang Xin, chief executive of Soho China Ltd, who paid $700 million through her family trust to buy a stake in the General Motors Building in Manhattan, said that while the US regulatory and legal environment remained attractive, valuations were getting expensive. “I would not feel as comfortable today putting in money as I did a few years ago,” Zhang said.

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Chinese tourists have become the highest-spending overseas visitors to the U.S. and valued customers for U.S. shopping centers and travel industries

Chinese tourists - Chanel store- China Elite FocusMinutes after arriving by bus at an outlet mall in Cabazon, a dozen or so Chinese tourists hustled out to buy luggage that they planned to stuff with high-end clothes, shoes and bags.
But not Guoshing Cui, a Samsung supervisor from Guangzhou. He made a beeline for the Coach store, where he picked out three expensive handbags. He paid more than $800 from a wad of $100 bills.
The bags were gifts for family and friends in China, where Coach goods sell for two to three times the price in the U.S. “It’s a smart move,” he said of his purchases.
That kind of power shopping has made the Chinese tourist the highest-spending overseas visitor to the U.S. and one of the most valued customers for U.S. outlet malls, shopping centers and tour bus operators.
Chinese tourists spend an average of $2,932 per visit to California, compared with $1,883 for other overseas visitors, according to the latest statistics by the U.S. Office of Travel and Tourism Industries. A big chunk of their spending — about 33% — goes for gifts and souvenirs.
“What we know about Chinese visitors is they don’t like to lay on the beaches,” said Ernest Wooden Jr., president of the Los Angeles Tourism and Convention Board. “What they do like is shopping.”
The outpouring of Chinese money helped set a record for spending by foreign visitors to the U.S. — $168.1 billion in 2012, according to federal officials. Los Angeles is getting its share of the Chinese spending: Nearly 1 in 3 Chinese travelers to the U.S. makes a stop in the City of Angels.

“The Chinese middle class is growing and their No. 1 destination is L.A.,” said Los Angeles Mayor Antonio Villaraigosa, who has made two trips to China and will be in Beijing this week to promote trade and travel with L.A.

“Our magazine has featured many articles about California in 2013, due to the high demand from our readers, very affluent independent Chinese travelers who carefully plan their trip to the U.S. and don’t trust much the official group tours travel agencies” said Pierre Gervois, Publisher of Luxury Hotels of America, a mandarin-only luxury travel publication about the United States. Pierre Gervois added “There is often this misconception that Chinese travelers are interested only in cheap hotels: It might have been true five years ago, but the new generation of Chinese travelers are perfectly aware of the quality of U.S. hotels and shopping malls. The South Coast Plaza (Orange County), for instance, has perfectly understood how to welcome Chinese shoppers. It’s an example to be followed by the entire luxury retail industry”
China’s relatively strong economy and its growing middle class means more Chinese citizens have money to travel and spend, according to tourism experts. The middle class in China numbered 247 million people in 2011, or 18% of the population, and is projected to grow to more than 600 million by 2020.
Visitors to California from China are typically professionals, executives or managers, with an average annual income of $66,900 — compared with an annual per capita income of about $5,000 for all Chinese residents, according to statistics from the U.S. and Chinese governments.
To draw in more Chinese spending, store owners, hotel managers and tour guides in Southern California are going out of their way to welcome Chinese tourists.
At the Desert Hills Premium Outlets in Cabazon, 20 of the 130 stores employ Mandarin-speaking salesclerks such as Jeffrey Hsu, who works at the mall’s Ugg Australia store.

“I think we understand their customs,” Hsu said. “When someone comes to a foreign country they want to bring back gifts for their family and friends.”
Spending by Chinese travelers has grown so fast in the last few years that it has surpassed the per capita outlays of other high-spending visitors, including travelers from Japan, Australia, Brazil and South Korea.
The customs and unique characteristics of the local economy shape how foreign visitors spend their time and money when visiting the U.S.
Australians, for example, share a similar culture with the U.S. and are more likely than other overseas travelers to visit museums, art galleries and historical sites.
“We are fascinated by peoples of different cultures,” said James McKay, an engineer from Melbourne, whose recent visit to the U.S. included tours of Alcatraz island in San Francisco, the Pearl Harbor memorial in Hawaii and ground zero in New York. He also took a historic tour of Disneyland with his wife, Karen.
Japanese tourists, according to travel surveys, spend heavily at restaurants because certain foods, particularly red meat, are much more expensive in the island nation.
That may explain why Morton’s steakhouse in Beverly Hills has become hugely popular among Japanese tourists.
“Don’t even put fish or chicken in front of them,” Joanna Sanchez, a spokeswoman for the restaurant, said of Japanese visitors. “They come for steak.”
But Chinese tourists tend not to shop for themselves. Most of their purchases — usually high-end clothes and accessories featured in American movies and magazines — are gifts for friends and family.
Chinese tourists in the U.S. target brands such as Coach, Ugg, Polo, Nike, Tommy Hilfiger, Neiman Marcus and L’Occitane. Steep Chinese taxes make such brands two to three times more expensive in China, said Helen Koo, president of America Asia tours in Monterey Park.
“Many tourists feel that the savings more than pay for the entire trip,” she said.

Source: Los Angeles Times / Hugo Martin

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Boston’s golden opportunities with Chinese tourists

boston-heartBoston is a dense and busy place—a tangle of crowded old roads and highways, office towers, and deafening construction zones. To those who live here, it can feel snarled and frenzied; to those who visit from the suburbs or countryside, it is one of America’s quintessential urban destinations.
But that’s not what Jolin Zhou sees.
Zhou, who moved from China to Amherst in 2007, then moving to Boston in 2009, and works at a company called Sunshine Travel Services, paints a very different picture of the city when describing it to her associates in Beijing and Shanghai. “You can enjoy nature here,” she says. “There’s fresh air, and a relaxing, healthful environment.”
This portrait of Boston as a bucolic health retreat might sound odd to most full-time residents. But it turns out to be central to selling the city to a group that is rapidly growing in size and economic importance all over the world: Chinese tourists.

Over the past several years, cities across America have entered into a strange and unprecedented competition to capture the interest of the world’s most lucrative and fastest-growing stream of travelers. With new wealth, new freedom, a smoother visa process, and the recent introduction of paid vacation days, Chinese tourists are flowing outward and spending huge amounts of money wherever they go. Last year they spent $102 billion globally, according to the UN World Tourism Organization—40 percent more than the year before, making them the world’s highest-spending tourist group for the first time ever.
Not wanting to be left behind, the local tourism industry is trying to figure out what the city and the state can do to capitalize on the steroidal growth of the Chinese market. So far, this project has involved Massport lobbying airline operators to introduce a direct flight from China to Logan Airport, and the Massachusetts Office of Travel and Tourism running seminars for local hotel operators, retailers, and restaurateurs about the quirks of Chinese travelers—that they like warm soy milk at breakfast, for instance, and appreciate it when their rooms come with complimentary slippers and instant noodle cups in the minibar.
But at the heart of this campaign is the task of projecting a “Boston brand” that will stand out from America’s other cities and attractions, reflecting the city’s special features in a way that appeals specifically to the Chinese. In some ways, the portrait that’s emerging is predictable—given the Chinese interest in education, it makes sense that Harvard and MIT are the number one points of interest. But there are also less familiar elements, among them the idea that Boston, compared to smog-choked cities like Beijing, feels profoundly peaceful and healthy.
“Bostonians take all of this for granted, all the great parks and the greenery and the waterfront and the Harbor Islands and the blue sky,” said Pat Moscaritolo, the president of the Greater Boston Convention and Visitors Bureau, a nonprofit that works with Sunshine Travel to attract Chinese travelers and promote Boston to Chinese tour operators. He added: “It’s a huge contrast to how people in Beijing and Shanghai live their lives.”
The competition is stiff, as cities around the country scramble to create images of themselves deliberately tailored for the Chinese market. Together, they are conjuring a vision of America, and what it has to offer, that is tuned to the often unexpected ways that people from a different culture might see it.
“It’s that old adage,” said Moscaritolo. “‘You’re never a visitor in your own home city.’”
In August, a group of about 15 Chinese journalists gathered in the backyard of the city-owned Parkman House, enjoying some wine before a “Taste of New England”-themed dinner. The next day, they would travel to Plymouth, and the day after that, Cape Cod. “Every one of these international visitors is a walking stimulus package!” exclaimed Moscaritolo, who helped plan the trip in hopes of inspiring the journalists to publish stories telling their readers to come to New England.
Right now, that is not what most Chinese tourists do when they visit America. Instead—as part of large, organized tour groups—they tend to fly into New York or California, which have direct flights connecting them to Beijing and Shanghai, and which attract by far the largest share of the Chinese tourists bound for the United States. From there, travelers take buses to see as many nearby sites as they can, often at a breakneck pace. Boston tends to be nothing more than a daylong interlude on the bus tour from New York, with visitors disembarking in Cambridge to see Harvard and MIT before continuing on their journeys.

Those sorts of visits brought in a little less than $300 million last year, according to a report commissioned by the Greater Boston Convention and Visitors Bureau. But Bruce Bommarito, a longtime tourism consultant fluent in Mandarin who has been helping Boston navigate the Chinese market, says that number could be a lot higher if the city could capture the attention of people who have already been to the United States once, and want to return in order to get to know the country in a deeper way. That’s a “different type of tourist,” Bommarito said—and as the Chinese travel boom continues, it’s one that will become more and more common.
In order to get Chinese people to stay longer in Boston and New England—to stay in the city’s hotels and eat at its restaurants for multiple days and nights, then make short trips to other parts of the region—the first order of business, according to Moscaritolo, is convincing an airline to start running a direct flight from China to Logan Airport. People flying directly in and out would be more likely to spend their money here—especially on the luxury goods they plan to take home. In July, The Wall Street Journal reported that Hainan Airlines had sought approval from Chinese regulators to start a Boston route as early as next year.

‘This new Hainan Airlines route between Beijing and Boston is an incredible opportunity for Boston” said Pierre Gervois, CEO of China Elite Focus Magazines LLC Publisher of Luxury Hotels of America, a travel magazine for affluent Chinese travelers, and an expert in marketing US destinations to Chinese travelers. He added “Boston is a sophisticated destination that will appeal to affluent travelers who have already been to New York and Las Vegas. With its historical and cultural background, the city should definitely target independent Chinese travelers, and not the group tours, who might prefer other mainstream destinations”
It’s not just Boston that wants their business, of course: Across the country, a map is emerging of city-specific pitches engineered to the enthusiasms and preferences of the imagined Chinese tourist. In Chicago, emphasis is placed on Michael Jordan and Derrick Rose—massive stars in China, where basketball is popular—as well as the University of Chicago’s record of producing Nobel Prize winners. Seattle uses a popular Chinese romantic comedy that was set there, “Beijing Meets Seattle,” as a marketing hook.
“Houston has worked the market very hard from a Jeremy Lin—Yao Ming angle,” said Bommarito. He added: “Hawaii does very well because of its proximity. Florida is starting to grow, particularly Orlando and Miami, because the Chinese like cruise ships and they like the mouse.”
In Boston, the trick has been figuring out what the city can offer besides a chance to visit the educational mecca of Cambridge—a big draw, but not enough to convince tourists to stay here more than a day or two. This challenge has required those involved in the Boston tourism industry to put themselves in the minds of the people they’re trying to pull in. “What you need to do is look at the reasons why they travel, what they’re looking for when they come to America,” Moscaritolo said.
Some things are obvious. It’s well known, for instance, that Chinese travelers love to shop, because the steep sales tax in China makes luxury goods so much more expensive there. But others are more surprising: American history, it turns out, is of great interest, which makes Boston’s unique role in it a major selling point. “One point I try to market is that Boston is one of the oldest cities in America,” said Zhou, adding that many Chinese people don’t realize that historical events they learned about in school, like the landing of the Mayflower, took place near Boston. Part of Zhou’s pitch, for that reason, is that “Boston is the birthplace of liberty and freedom.”
Then there’s the nature angle, which positions Boston as a place with fresh air and a gateway to New England, where visitors can enjoy the rolling hills and foliage, go whale-watching, eat fresh lobster, and hike through national parks. That Boston offers such easy access to nature appeals to Chinese tourists looking for respite from the atmosphere back home: “If you consider how polluted, how thick, the air in Beijing and Shanghai is, you will understand this,” said Yang Xiao, a reporter for Southern People Weekly, who arrived in Boston on a Nieman Fellowship just a month ago. Since then Xiao has visited Walden Pond, and is planning a trip to Maine; even being here for a little while, he said, “changes the air in your lungs.”
The outdoors is already part of Chinese travel habits: Domestically, tourists spend occasional weekends relaxing in small farm towns, and if they have more vacation time, they go to Tibet, the Yunnan province, or Thailand. “There’s a market in China with people going to different places to enjoy nature,” said Zhou, “but they don’t know yet that Boston and New England [have] that. That’s the message we want to send out.”
In light of China’s growing concerns about pollution, Boston looks practically like a spa destination, a city defined by good health. Adding to this impression are its world-class hospitals—where, according to Zhou, some Chinese visitors have gone for “general body checks” they believed would be far superior to what they could get back home. “Sometimes Chinese people say if you cannot get treated in Boston, you cannot get treated anywhere else, because Boston has the most advanced hospitals in the world,” Zhou said.

As the number of Chinese tourists pouring out into the world continues to grow, he went on, we will start to see their interests and preferences reflected more and more in the places they’re visiting.
The nature of these pitches demonstrates that the appeal of America isn’t always what Americans assume it is. In some ways, we’re an older economy now than China, and visitors from a land of towering apartment buildings and levitating trains will be less surprised by our gleaming skyscrapers than they are charmed by our old-fashioned parks, our bodies of water, and the height restrictions in our neighborhoods.
“Sometimes we get caught up in the notion of bigness in America, whether it’s big buildings or big cities or big airports, and we think that if it’s not huge and big it’s not good,” Moscaritolo said. But when he talks to Chinese visitors about Boston, he said, “every one of them gets animated by the concept of open space, the streetscape, and looking up and being able to see the sky.”

Source: Boston Globe, article by Leon Neyfakh

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