Articles Posted in Chinese Investment

Published on:

July 9, 2014

LOS ANGELES—The Global Hospitality Group® and the Chinese Investment Group™ at Jeffer Mangels Butler & Mitchell LLP are pleased to announce the launch of a Chinese-language version of the Hotel Law Blog. It is available as a new tab on www.HotelLawyer.com or it can be accessed directly at www.ChineseHotelLawBlog.com.

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Published on:

16 June 2014

The growth of outbound Chinese investment

Earlier this month we posted an article about the surge in Chinese investment as reported by Tiffany Hsu in the Los Angeles Times. See, “China and JMBM’s Chinese Investment Group™ are in the news again!”

That article prominently featured the Sheraton Gateway LAX hotel, its 15% increase in Chinese travelers since the beginning of the year, and its purchase by our Shenzen Hazens Real Estate Group, and JMBM’s role as counsel to Shenzen Hazens.

Special Report Just Released: Growing Together — China and LA County Report – June 2014

Tiffany Hsu’s article also summarized some of the interesting data from a new report dated June 2014 by the Los Angeles County Economic Development Corp. (LACEDEC), entitled “Growing Together — China and Los Angeles County.” A full copy of LACEDEC’s Growing Together report (the “Growing Together Report” or simply the “Report”) can be downloaded by clicking the link at the end of this article.

But here are the “Key Findings” of the Report:

  • Investment into Los Angeles County from China has doubled over the past 5 years, with China becoming one of Los Angeles County’s top investors
  • China and Los Angeles County continue to increase business and commercial ties and the opportunities for Los Angeles
  • Tourism has nearly quadrupled over the past four years alone, from 158,000 Chinese tourists in 2009 to 570,000 in 2013, making China the top overseas market for Los Angeles tourism
  • Los Angeles is America’s top international trade gateway to China and China’s top gateway to the U.S., handling nearly 45% of trade between the two countries
  • China is the Los Angeles Customs District’s (LACD’s) #1 partner in international trade, accounting for nearly 60% of all activity at the San Pedro Bay ports
  • LACD exports to China have increased from $23 billion in 2009 to $35 billion in 2013 – less waste and scrap and more consumer and knowledge-intensive goods
  • Los Angeles County has the largest Chinese population of any county in the nation, and has grown from 360,000 in 2008 to 413,000 in 2012
  • Los Angeles County has the largest number of Chinese students of any county in the nation, increasing from roughly 3,000 Chinese students studying in local universities in 2009 to roughly 10,000 in 2013
  • Strong cultural and network ties are the foundation of the relationship
  • Future business prospects may be found in clean tech, entertainment, aerospace, e-commerce, real estate/property development, tourism, logistics and electronics.

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Published on:

15 June 2014

Concerns over a real estate bubble in China

For decades, China was referred to as the “sleeping giant.” This reference is to the great potential impact of the country, its vast population, and its economy, but also to the fact that this potential was largely unrealized for hundreds of years. Well, the sleeping giant is awake! And the world financial press is now full of analysts following China and the international ramifications of its every action on the world economy.

Recently, great concern has been raised by some over the impact of the stalling Chinese economy as it drops from double-digit growth in GDP to 7.5% or less. Alarm has been raised about the bubble in the Chine real estate markets, particularly the housing, and now commercial real estate as well. And most recently, financial analysts worry about the shadow banking system (financing and loans by non-banks) and Chinese real estate companies’ interest in purchasing banks or substantial interests in them.

Some suggest that Chinese construction companies’ investments in banks may be with a view to getting easier loans on more questionable deals, and that when real estate projects sour, they could take down both the construction companies and their banks. Is this reminiscent of the S&L crisis and the Japanese bubble of the 1980s?

Let’s separate the issues — real estate company investment in banks and shadow banking

To begin with, one must clearly define the activity being analyzed, who the players are, and the market in which the activity is taking place. For example, current reports detail investments by Chinese real estate development companies in banks located in mainland China, Hong Kong, Australia, the United States, and elsewhere. Some of these investments are modest. Some of them are significant. Some of them appear to be newly capitalized banks with IPOs financed largely by the real estate construction companies (taking the “p” out of “IPO”).

Each country has its unique set of government and regulatory controls. It is difficult to generalize the motivation of the Chinese real estate companies in making banking investments, whether and how they will attempt to deal with the banks they have invested in, and how regulators will respond in each affected jurisdiction as to particular investments and related activities.

Will this be like the Japanese investment bubble of the 1980s or the S&L crisis?

At least two situations may serve as case studies to provide some historical perspective on the new phenomenon of Chinese real estate companies investing in banks, and the shadow banking situation. One is the US real estate bubble of the 1980s followed by the Savings and Loan (S&L) and banking crisis with more bank failures than any time since the Great Depression. The other somewhat intertwined event is the Japanese investment (by banks and related Japanese construction companies) of up to $120 billion in United States real estate (primarily in Hawaii, California, and New York), and subsequently “disinvestment” in the collapse of the early 1990s. Many believe that the Japanese investment was made at what otherwise would have been the peak of the US real estate bubble (carried by loose S&L lending and tax-driven investments that made no economic sense). The Japanese investment propelled the U.S. real estate bubble even higher for several years until the it finally became unsustainable, and collapsed in a worse crash than might otherwise have resulted.

Both the S&L crisis and the Japanese investment phenomena displayed cozy relationships of real estate companies and lenders. The Japanese banks owned significant holdings in their borrower clients, and encouraged them to buy market share with below-market loans. When the real estate market soured, the Japanese banks were hit with the double whammy of huge loans on real estate now worth a fraction of its cost, and stock investments in companies with huge losses. The leverage increased the pain for everyone participating and the lost decade (or two) has followed for Japan.

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Published on:

6 June 2014

As the significance of Chinese investment in the US continues its rapid growth, news articles regularly document new details of this major trend. And in today’s Los Angeles Times, Tiffany Hsu provided some interesting facts in an article entitled “Chinese tourism and investment in Southern California surges.” Her article led off with the example of a 15% increase in Chinese travelers at the Sheraton Gateway LAX Hotel. We served as lawyers and business advisors to Shenzen Hazens Real Estate Group (a large Chinese construction company) with its $96 million purchase of the hotel. The article explains that the new owner has put up billboards in China promoting the 802-room hotel near the main entrance of the Los Angeles International Airport. As an example of how important such Chinese investors have become in the United States, Tiffany Hsu also noted that JMBM launched its Chinese Investment Group™ in 2011 to orchestrate deals for Chinese investors in the United States, like the purchase of the Sheraton Gateway, the Crowne Plaza Los Angeles Harbor, the Regent hotel brand and other real estate, solar and business investments. Here are a few highlights on the big surge in Chinese tourism and investment in Southern California reported by the Los Angeles Times:

  • Tourism from China into Los Angeles roughly quadrupled over the last five years, growing from 158,000 in 2009 to 570,000 visitors last year, and is expected to almost quadruple again to 2,000,000 by 2020 according to a new report from the Los Angeles County Economic Development Corp. (LACEDC).
  • The LACEDC reports that Chinese investment interest in Southern California is also very strong. The travel is not just for tourism, but for Chinese people buying homes, businesses and other investments.
  • More Chinese students attend universities in Southern California than any other group of American universities — 10,000 pupils last year, up from 3,000 in 2009.
  • The number of Chinese-owned businesses in Los Angeles county doubled in the last six years.
  • And Southland trade with China is booming. The Los Angeles Customs District saw record trade volume last year valued at $414.5 billion. Of that, imports and exports from China made up more than half — $221.4 billion, up 4.5% from 2012.
  • The Los Angeles-Long Beach ports, which make up part of the district and constitute the ninth busiest port system worldwide, now attribute 60% of their activity to China.
  • Exports to China through Los Angeles grew by 52% in four years to $25.3 billion last year. Instead of the waste and scrap common in the past, those shipments are increasingly made up of electronics, machinery and other valuable goods destined for a fast-growing Chinese middle class.
  • The LACEDC report aptly summarizes the situation as follows: “The futures of Los Angeles and China are inextricably tied together.”

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Published on:

6 February 2014

Jeffer Mangels Butler & Mitchell LLP (JMBM) is pleased to announce the successful closing of a number of hotel and real estate purchases by members of its Chinese Investment Group™. The attorneys in JMBM’s Chinese Investment Group™ help Chinese investors make investments in the United States – particularly those involving hotels and real estate. They also provide guidance on corporate structure, formation, tax issues, governance and regulatory compliance.

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Published on:

26 December 2013

The hotel lawyers of JMBM’s Global Hospitality Group® and Chinese Investment Group™ assisted Hazens Investment, LLC, in the company’s purchase of the 15-story, 802-room Sheraton Gateway LAX Hotel, located close to Los Angeles International Airport.

Hazens Investment is a subsidiary of Shenzhen Hazens Real Estate Group Co. Ltd., one of the top 100 largest construction and development companies in China, based in Shenzhen, China. Hazens Investment and the seller, an affiliate of Long Wharf Real Estate Partners, closed the deal on November 19, 2013.

“With a great deal of experience in representing Chinese investors over the years, we have formed a special practice group to assist China-based clients in successfully closing transactions in the U.S.,” said Jim Butler, Chairman of JMBM’s Chinese Investment Group™ and Global Hospitality Group®. The acquisition of the Sheraton Gateway marks Shenzhen’s first U.S. based acquisition.

Greg Sun, Vice President of Hazens Investment, stated: “When we engaged U.S. counsel for the transaction, we not only sought out a law firm expert in the hospitality industry, which JMBM is known for, but also specifically a Mandarin speaking attorney like Chang, who could not only communicate in Mandarin directly with Shenzhen’s key personnel during the negotiations, but also understands the cultural differences of doing business in China and the U.S. and is able to bridge that gap.”

JMBM’s Chinese Investment Group® is a dedicated team of hotel, real estate and corporate lawyers that advise Chinese investors in making prudent and economically successful investments in hotels and real estate in the U.S.

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Published on:

29 August 2012

JMBM’s Chinese Investment Group™ has been very busy the past few years. Our team of lawyers represents the interests of Chinese investors who are purchasing or building hotels in the United States. We also represent hotel developers seeking to take advantage of the inbound foreign investment to capitalize their projects — whether through the EB-5 investment program or foreign direct investment.

In the EB-5 area alone, we have worked on more than 40 projects under the EB-5 investment visa program throughout the U.S., most of which are projects made possible with Chinese investment capital.

Here is a recap of some current events involving our Chinese Investment Group™ and Chinese investors.

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Published on:

Click here for the latest articles on EB-5 Financing. 

 

On June 21, 2002 Guy Maisnik will be a featured speaker at the 2nd Chinese Investment and EB-5 Finance Forum in Los Angeles.

This Conference is designed for everyone interested in taking advantage of foreign investment from China “inbound” for U.S. real estate. It features some of the most knowledgeable and respected experts in the country on this subject and will facilitate foreign investors and capital sources networking with U.S. real estate professionals, developers, and owners.

Guy Maisnik, an industry veteran with nearly 30 years of real estate and hospitality experience, will provide practical tips and insights from lessons learned in representing Chinese investors in the U.S. Maisnik says, “The more you understand the nature of your investors, their concerns and the issues, the greater your chances for success with your transactions.”

Maisnik is a vice chair and a senior member of JMBM’s Global Hospitality Group® and Chinese Investment Group, and is also a member of and is involved in more than 40 Chinese investments in the U.S. — EB-5 or otherwise. Maisnik notes that “Chinese investors are particularly interested in hotel and related hospitality investment as well as broader classes of real estate.”
For more information on Chinese investment and EB-5, please click here or go to: http://hotellaw.jmbm.com/eb5_financing.

For more information on the 2nd Chinese Investment and EB-5 Finance Forum, click here or go to :
http://www.attractasianinvestors.com/index.html.

Come join Guy at the Forum and take advantage of this opportunity.
Embassy Suites Los Angeles International Airport/North
9:00 am – 4:30 pm
June 21, 2012
Register Now

Published on:

25 October 2011

Click here for the latest articles on EB-5 Financing. 
On Friday, October 21, 2011 I did a Q&A interview with the National Real Estate Bisnow about Chinese investment in U.S. hotels. Here is the full Question & Answer exchange, a portion of which appeared in the Biznow article.

There’s been an explosion of Chinese investment in the US, especially real estate. And many people believe it will surpass the Japanese investment of the late ’80s (estimated to have exceeded $120B).

There’s been an explosion of Chinese investment in US real estate. Who’s investing and where, and how much investment do you expect in 2011?

The increasing wave of Chinese investment in the U.S. is being fueled by the Chinese government (generally acting through construction companies, banks and other intermediary companies) and an exploding class of wealthy Chinese. The top .05% wealthiest Chinese have investible funds of more than $2.7 trillion, and there is a rapidly growing class of billionaires and more than 800,000 millionaires. Plus there is a huge rising middle class looking to travel and enjoy life.

Of course, in addition to Mainland China there are the Chinese in Taiwan, and everywhere else such as Hong Kong, Singapore, and Indonesia.

A recent Merchants Bank report estimates that rich Chinese individuals — those with assets of more than 10 million yuan — have about 3.6 trillion yuan ($564 billion) invested overseas. No reliable numbers are available for total Chinese foreign investment or Chinese investment in the United States. The investors are largely staying under the radar to avoid publicity and possible adverse reactions, and there seems to be no means to track the investments and get an aggregate investment number.

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Published on:

4 August 2011

Hotel Investment: Why Asian investors are targeting U.S. hotels for purchase and investment, and what could it mean for you?

This week I was interviewed by several media sources to talk about the explosion of Asian investment – and particularly Chinese investment – in U.S. hotels and real estate. Nadja Brandt at Bloomberg News was kind enough to quote me in one of her articles on the subject, and Gigi Stone, Bloomberg TV anchor, had me in the Bloomberg TV studios for a brief interview and even briefer video clip! (Yes, Mom, it’s long enough that you can tell it’s me and she does say nice things about our Global Hospitality Group®). Bloomberg TV also made a point of highlighting JMBM’s Chinese Investment Group™ which was recently announced.

The Chinese Investment Group™ . . . provides a gateway for Chinese investment in the United States.

Nadja Brandt’s article (Asian Buyers Target U.S. Hotels as Affluence Increases Travel), discusses the just-completed iconic purchase by Hong Kong billionaire Cheng Yu-tung of 5 luxury hotel properties, including the Carlyle Hotel in Manhattan, and Rosewood properties including The Mansion on Turtle Creek and The Crescent in Dallas, The Inn of the Anasazi in Santa Fe, and Little Dix Bay in the British Virgin Islands.

The Cheng family also owns the Beverly Wilshire in Beverly Hills and once owned a stake in the Four Seasons Hotel in New York.

Bloomberg TV also made a point of highlighting JMBM’s Chinese Investment Group™

Bloomberg’s coverage of Chinese (and broader Asian) investment in the U.S. has really been top drawer, so if you are interested in this subject you will want to follow it. And if you want to go beyond the Bloomberg article, read on about why Asian investment is focused on US hotels.

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