China’s real estate developers have left home for Australia, Europe and the US, but that doesn’t mean that they’ve left their funding partners behind.
Chinese financial institutions are taking a growing slice of the real estate lending market in the US, and much of their business comes from developers such as Dalian Wanda which are taking on billions of dollars in new projects globally.
Ping An Bank, the bank financing division of a top five Chinese insurer, has extended a $700 million loan to the developers of Chicago’s Vista Tower, said to be the biggest construction loan in the city’s history, according to US media reports. The financing, secured nearly eight months after the project officially broke ground, will allow partners Magellan Development Group and Dalian Wanda Group to complete the billion-dollar, mixed-use luxury skyscraper by 2020.
One of the biggest Chinese-invested real estate projects in the US, the 93-storey Vista Tower will be Chicago’s third-tallest building upon completion. The loan is the latest example of China’s deep-pocketed banks backing development projects in the US as mainland investment in the country’s property markets continues to grow.
Chinese Capital To Reshape the Chicago Skyline
Designed by local architect Jeanne Gang, the 95-storey skyscraper on the south bank of the Chicago River will offer 406 luxury condo units and a five-star Wanda Vista Hotel with 191 rooms. Local residential developer Magellan teamed up with Wanda on the project, which is located in Magellan’s Lakeshore East master-planned community in the famed Central Loop district.
Property records from Chicago’s Cook County indicate that Magellan and Wanda took out the loan from Ping An Bank on April 28, according to a story in the Chicago Tribune. In a departure from the usual financing process, the developers were able to kick off construction before securing the loan, with foundation work starting last August, followed by the official groundbreaking ceremony in September.
Magellan relied on assurances from Wanda, the Beijing-based commercial property builder headed by China’s richest man, Wang Jianlin, that the joint venture would be able to secure financing, Crain’s Chicago Business reported. “I had the ultimate confidence in our partner, but it’s not our normal course of business. Yeah, we were nervous,” Magellan President David Carlins was quoted as saying. Wanda apparently believed that it would be easier to obtain a loan after the developers had finished underground construction.
Besides the construction loan, Wanda and Magellan are financing the rest of the development with about $300 million in equity, some of which they may drum up through the EB-5 investor visa program. The partners are in the process of applying to the federal government for approval to raise $200 million through the program and have started shopping the project to Chinese investors. Historically, more than 75 percent of EB-5 visas have been awarded to Chinese investors each year.
Vista Tower has reportedly pre-sold more than 35 percent of its condo units, which are some of the priciest in the city at an average of $1,150 per square foot.
Mainland Firms Are Bankrolling More Projects Overseas
The construction loan for Vista Tower may be a record-breaker in Chicago, surpassing the $640 million financing Donald Trump received for the nearby Trump International Hotel & Tower in 2005, but is business as usual for the Shenzhen-based Ping An Bank. In July of last year, the unit of financial services giant Ping An Group backed another Wanda project, bailing out the stalled One Nine Elms development in London with a timely £500 million ($659 million) loan.
Ping An is not the only mainland financial institution playing a growing role in financing overseas real estate projects. Earlier this month, Bank of China (Hong Kong) joined HSBC and ING in securing financing for the acquisition of the “Cheesegrater” office tower, the tallest building in the City of London, which was bought by Chongqing-based CC Land in March for £1.15 billion ($1.42 billion).
State-owned Bank of China, the world’s fourth-largest bank by assets, has also been among the leading financial backers of New York’s developers. In July, BOC joined a consortium of lenders that agreed to provide a $1.5 billion construction loan for Manhattan’s One Vanderbilt, a new office tower adjacent to Grand Central Terminal that is being developed by New York’s SL Green Realty.
BOC also extended a $313.5 million loan to a US consortium renovating a 14-storey building at 63 Madison Avenue in Manhattan, and lent $50.7 million for the W New York Downtown Hotel and Residences.