After appearing on 60 Minutes last week, Zhang Xin, CEO of major real estate developer Soho China is now preparing to make an even bigger splash by acquiring a landmark building in downtown Manhattan.
According to published reports, Zhang is leading a group of investors bidding to purchase a 40 percent share in the General Motors building in New York. If completed, the deal would most likely be the largest direct acquisition of US real estate by a Chinese investor.
According to real estate sources informed about the transaction, the deal would value the GM building at US$3.4 billion, the sources said, making the 50-story office building on Fifth Avenue the most valuable office building in the United States.
The stake under discussion currently belongs to a group of Middle-Eastern institutional investors and the remaining 60 percent is not under discussion and belongs to developer Boston Properties Inc. The investment consortium, along with Boston Properties paid US$2.8 billion to acquire the landmark from Macklowe Properties in 2008.
The GM building is located at the southeast corner of Central Park and has some of the highest office rents in New York. The building’s ground floor is home to an Apple Store and the building has many other high end tenants.
While there has been considerable press attention given to the potential for Chinese investors to acquire US real estate assets, so far this has not amounted to a major trend. According to Real Capital Analytics, US real estate purchase by Chinese investors amounted to less than US$1 billion last year, excluding investments through funds.
The largest purchases by Chinese have been made indirectly through stakes in such private equity funds as Blackstone, but this low profile route might not be the best fit with Soho’s style.
While the Soho power couple of Pan Shiyi and Zhang Xin are known as real estate developers, they are almost as well known for their penchant for publicity. Compared to other Chinese real estate executives who prefer to remain in the background, the masters of Soho are active on social media, speak out on political issues and routinely trumpet their asset acquisitions.
However, while not grabbing the headlines that Soho is likely to reap if the GM Building purchase goes through, other Chinese developers are also active in the market.
Vanke Group, China’s largest real estate developer, formally jumped into the US market on February 18th when it announced announced a joint venture residential project in San Francisco with US firm Tishman Speyer. Also, late last year Xinyuan Real Estate acquired a residential site in Brooklyn for US$54.2 million.