Written by Kelly Johnson, Officer, CFAA Communication Committee
It’s the year of the Monkey! What better way to ring in the New Year than having one of our most elegant events hosted at the soon-to-be opened Wanda Vista Sales Gallery. Cocktails, hors d’oeuvres, friendly faces, and an uplifting atmosphere were the perfect combination for attendees to enjoy the beginning of the New Year. Everyone got a chance to learn about the future of overseas investments by China into the US from two established professionals in the field; Mr.Xin He, Deputy CFO of Wanda America Investment Holding Co and Mr. Mr.Alex (Yong) Hao, Partner at Jun He Law Offices.
What would the Chinese New Year be without dedicating some time to reflect on the previous year and embracing what the future holds for China and the US. CFAA was excited to invite back Mr. Zhao Weiping, Consul General of China in Chicago. Mr. Zhao opened up our event with remarks regarding the rise of the Chinese investment. He believes the movement of the Chinese investment will continue to grow in the year to come because of the strong force of the Chinese government as well as the ever growing, strong interest of the Chinese customers in America. Most importantly, the Chinese economy will continue to grow, which will provide the fundamental guarantee of the increase of the Chinese investments. China has adequate policies and financial capabilities to do that. The Chinese economy will not collapse and the goal to double its GDP by 2020 will be reached. “China is the only country in the world which has conducted reform in opening up for more than 30 years and is still pursuing this course with even greater enthusiasm. We believe in the ambitious reform program adopted by the Chinese government as well as a promising future of the Chinese economy.”
The first of the key note speakers was Mr. He Xing of Wanda Investment Group who presented his thoughts on the status of the US real estate market. Mr. Xing outlined the presentation that focused on how responsible investors into the US market get situated. An investor must analyze the current US market situation, determine why the US market is a good choice, and finally, how to go about investing in the US.
When it comes to Chinese investors, the two largest real estate prospects are office buildings and hotels. Office buildings have been a major focus on Chinese investors from 2013-2015 accounting for roughly 60% of real estate investments made. The Chinese economy is expanding quickly which requires investors to diversify their portfolios. Changes in Chinese government policies are strong motivators for outbound investments towards the US. These Chinese investors have an interest in US real estate because it provides stable returns which are fairly modest. Finally, the US has reached the point of recovery from the global financial crisis of 2008. By investing in a healthy economy, an investor could expect to get their investment back in the market.
According to Mr. Xing there are 4 areas that businesses need to consider when trying to invest in US real estate: Feasibility, Legal Steps, Financing, and Deliverance. An investor needs to have a strong knowledge of the US market regarding relevant regulations and tax laws; jumping into a project too soon can cause delays and could even result in increased costs from the time lost. Due diligence is extremely important because there can be many complications if investors are not careful. There are many legal choices to be made before work can be done. Such as, whether or not an investor is looking to buy or build in the US, merge or acquire another business, and understanding the tax structure. “Always ask for legal advice,” he strongly stressed.
Financing and delivering on the project is pretty explanatory. Getting the money is the most important part; an investor must consider the cost of financing or the project will collapse. There are multiple forms of financing from Real Estate Investment Trusts (REITS), construction loans, or even EB-5 investment which was specifically designed to stimulate the economy through job creation and capital investment from foreign investors, in return for foreigners to obtain Green Cards. Finally, the last step is to deliver on the project. Make sure you have control over your costs, keep communication open with all of the stakeholders, and to make sure you can get your money back.
CFAA and guests were very lucky to host this event at the Wanda Vista Sales Gallery where guests were able to get a firsthand look at the phenomenal condo and 6-star hotel concept designs that Wanda International will be developing in Chicago. We were delighted to hear from Mr. Xing about Wanda International and the project they are developing. Shown below are images of the 3D design of the finished buildings. Wanda International is the #1 developer in China and is the largest real estate enterprise and the biggest 5-star hotel owner in the world. By the year 2020 they strive to be a world class multinational corporation with $200 billion in assets with a market capital of $200 billion.
Our final speaker was Alex Hao. He closed out our event by discussing what the China Outbound Investments currently look like. In 2003, the Chinese overseas foreign direct investment was nearly nothing, but rose to 4 billion in 2012! China is far behind in FDI in the US but, China is relaxing its policies for Chinese investors overseas. The NDRC (National Development and Reform Commission) approves these projects and any transactions below 1 billion dollars can be filed afterwards instead of needing pre-approval. To some, it appears as though the US seems to be unfriendly to foreign investors, but in reality, it’s really a matter of knowing how outbound investments make their way into the country. The US is very welcoming to Chinese investment. Alex gave an example stating that foreign parties can buy bad assets from bankrupt companies fairly cleanly, in the US.
CFAA has announced that we are going to revamp and enhance our membership program by providing more member benefits, including member-only lunch series, which gives members the opportunity to connect with each other in a small, informal setting. Each lunch meeting will focus on a unique investment or career related topic. Our first one was held in February. We are also going to introduce a function ticket for members to attend our event for free once a year. On the marketing side we have launched CFAA Spotlight, our by-weekly newsletter which provides you timely information on recent job postings and business events in Chicago area, as well as high quality finance-related articles. On the event side, each quarter we will have a theme and we will plan our events around the theme. The key word for the first quarter is China. This way we hope to provide more focused event planning to help you plan ahead and join our events.