CRE Opinion: Chinese Investors Have Discovered DFW
Sam Kartalis talks EB-5 in D Magazine CRE opinion; his conclusion is to expect more Chinese investors putting money in local projects. Read his column below.
I believe it’s common knowledge that the Chinese have been very involved with the EB-5 program for quite a few years now, mostly on the East and West coasts. However, more recently we’ve all been exposed to EB-5 Chinese monies being invested here in Dallas-Fort Worth. For example, they are participating in high visibility projects such as the Statler Hilton renovation by the Centurion group. With the EB-5 program having been extended recently by Congress, for at least another year, we should continue to see EB-5 monies from China being invested in local projects, especially because of our region’s dramatic growth, both in jobs and available Class A commercial real estate projects.
In the meantime, the attraction of Chinese Dollars to North Texas via the EB-5 program has not gone un-noticed in China by wealthy investors, entrepreneurs, and institutions who prefer to invest their dollars personally and directly into the U.S. More importantly, and seemingly all at once, the Chinese investors are now aware of a lot of smart money from around the world being directed to that magnet called DFW; and, they want a piece of it. Because of the massive growth of jobs due to the explosive migration of major companies to North Texas, they now have an option for investments other than the East and West Coasts. Even Better, they can now fly directly between DFW and the Chinese mainland!
I’m not implying that this all started at once and instantaneously at an imaginary starting line just recently. I can name many local developers who have been involved with Chinese investors for a longer period of time, but compared to what we’re seeing now, and excluding EB-5 dollars, we are seeing a major increase in visits to DFW by Chinese nationals. Additionally, Chinese who already live in the area are encouraging Chinese nationals to join them in co-investing their dollars, or they are helping them locate and invest in local projects.
Interestingly enough, one of our investors participated in the EB-5 program years ago and, as a result, his children now attend U.S. colleges and will locate here, while he transitions himself, his company, and his investments directly to the U.S. I believe that this program works in our (the U.S.’s) favor by attracting proven and sophisticated entrepreneurs and their families to our country without becoming a burden to our tax rolls.
Another Chinese investor of ours, from California, tells us how and why he came to DFW to invest. He had just completed a purchase of a property in California. During the transaction, he asked the seller what he was going to do with his money from the closing? The California seller responded, “I’m taking it to Dallas!”
During this past year, we have been meeting with Chinese investors weekly for a variety of needs and wants. We have invested equity monies for individuals for as low as $250,000 and up to $1,000,000 for commercial LLC’s. They have contracted through us to purchase office buildings and multifamily properties. Land is our specialty, both for development and long term appreciation based upon confirmed projected growth; they have expressed an interest in both. These investments require patience and strong investment skills, which they possess. Their initial preference is for multi-family and single-family developments, both as investors and developers. Other Individuals like to buy homes here and then lease them out as a “hedge” to inflation and to protect their saving; many are purchased “sight unseen”. In effect, they are like all other investors with a few “quirks”. They do have some restrictions for “moving” assets and cash, but it’s all done with their government’s approval and subject to U.S. laws and disclosures.
My experience with the Chinese investors, both with those living in China and those living here, has been very “eye opening” and pleasant. They are friendly, respectful, well-informed, and very current about our local economy. I can tell you that they know what they’re talking about, and they do a thorough review and research on the particular asset they’re considering! They are very familiar with financing, cap rates, debt service coverage, LTV’s, LLC’s, LP’s, FAR’s, cost per-square-foot, NNN’s, CAM, demographics, etc.—again, very sophisticated.
After so many meetings and dealings with them through Younger Partners Global Manager, I feel that I can trust them, and I know that “trust” is a huge reciprocal requirement for both parties. They are great business people and can “pull the trigger” quickly when necessary. More than that, I really enjoy working with them! These are good people who impress me with their work ethic and intelligence.
They’re looking for a “piece of America” that most of us enjoy, and they would be great partners in continuing to build our country. My guess is that they will be very active and successful in the local and national commercial real estate arena for years to come.
Sam Kartalis is an advisor at Younger Partners.