Alice Gao, Senior VP of ICBC USA, speaks with Bob Braun, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. Alice explains the structure of ICBC USA, discusses interest rates, and Chinese immigrant investment in U.S. gateway cities.
A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.
Bob Braun: I’m here with Alice Gao, who’s a Senior Vice President of ICBC USA. Alice, thank you very much for coming and spending a little time with us today.
Alice Gao: Thank you very much.
Bob Braun: Alice, I’d like to ask a few questions which I think you’re very suited to in your position with ICBC. One question I’d like to ask is, what kind of projects are the bank most interested in lending to these days? Are there things that attract you more than others, or are more interested in than others these days?
Alice Gao: Well, let me just start with a brief introduction of our bank. I’m very excited that as of December 2015, the bank continues to be ranked as the number one largest bank in the world by total assets of $3.6 trillion, and also as number one on tier one capital, about $215 billion. We are also ranked number one by net profit of $44 million. So, with that, in the U.S., we have four financial institutions. So, the four together provide a full array of products and services. The first financial institution is ICBC Financial Services: it’s a broker dealer of security services. And we also have ICBC Standard Bank, which is a financial market and commodity bank based in New York. We also have ICBC New York Branch, which is a wholesale bank of ICBC Group. And lastly we have ICBC USA, a Federal Charter full licensed bank, FDIC insured.
So, ICBC USA has thirteen branches and one service center. We have three branches in New York, ten branches in California, one service center in Seattle. Together with these four financial institutions, physical locations and e-banking platform, we offer not only traditional deposits and loan services, we also offer a variety of products such as cash management, trade finance, treasury and also foreign exchange. Our strongest point to distinguish us from others is we do offer variety of services of onshore and offshore renminbi products.
Bob Braun: So most of the lending that you would do on hotels is through ICBC?
Alice Gao: Most of the lending for hotels is through ICBC New York Branch and ICBC USA.
Bob Braun: And in terms of the type of lending you’re doing, does ICBC have any current priorities or any current trends that it sees?
Alice Gao: For the corporate lending we have six industry specific teams to focus on, for example energy, technology and cross border, etc. For the real estate side we generally offer construction loans, acquisition and refinance loans and syndication loans. For the product type, we cover a wide range of products such as office building, retail, multi-family, condos, mixed use, of course hotels, and the land for development.
Bob Braun: And in terms of what you see, I know that you must be really aware of the interest rate environment for these loans. Where do you see interest rates, going – particularly for hotels? Do you see them staying stable? Going up? There’s not a lot down to go, but do see any direction there?
Alice Gao: Well definitely, we are in the interest rate rising environment. So, we project the interest rate will go up in the next couple years.
Bob Braun: Does that impact the kind of lending that you do, or is that just part of the business?
Alice Gao: It’s part of the business, but of course we have to take this into consideration of the underwriting. That will increase the cost and we will be more conservative on the loan-to-value and the cash flow and the debt service coverage.
Bob Braun: Now, the interest rates and the changes in the interest rates are also part of the general cycle. Where do you see – from your vantage point – where do you think we are in the hotel cycle? Are we at the beginning, the middle, are we seeing the end of this long run of good hotel results? What do you think from your position?
Alice Gao: I think we are in the bullish and expanding period. So we will probably still see one or two years of going up and probably then we will hit another cycle.
Bob Braun: When you are evaluating your hotel lending, are you looking at any particular type of product? Are there any particular initiatives you have? Are you looking at lending on urban properties? Are you looking at primary markets or secondary markets? Any kind of initiatives that you might have?
Alice Gao: Yes, with total 17 physical locations for ICBC U.S. operations, we cover from east coast to west coast. And with this year’s integration of these four U.S. operations, we expect to branch out to a much broader U.S. footprint. But of course with a continued focus on gateway cities.
Bob Braun: Okay, very good. So more in San Francisco, Los Angeles, New York, Miami – maybe not Peoria, right?
Alice Gao: Right, definitely, because our customer base is majority Chinese investors. They invest into the U.S. with ties to the Chinese consumer needs in cities like Los Angeles, San Francisco, New York – they have similar cultures with China. So people come to invest, and they feel a little bit easier, and also they are very focused on their children’s education. And whenever an individual or small private enterprise wants to invest in the U.S., they always target the real estate in the city which can create an immigration opportunity for them.
Bob Braun: Excellent, I see. So it’s a whole unit instead of simply looking at the hotel. You’re really looking at a much broader concept there.
Alice Gao: Right. In terms of the hotel it’s mostly focused on the brand name hotels. The people who normally invest in the hotel are middle-to-large privately-owned corporations or the state-owned companies. They want to use this brand name hotel, or the asset, to increase their business image in China too, so it’s helping the charter.
Bob Braun: That’s very helpful, that’s good for people to know. We’ve been doing Meet the Money® for a long time, we expect to keep doing it and we hope to have you again next year. So when we’re sitting across from each other next year, what do you think that we’ll be talking about?
Alice Gao: By this time next year, I hope I have a more successful story to share with the audience, both on the Chinese investment in the U.S. and also the American investment in China.
Our Perspective. We represent hotel owners, developers and investors. We have helped our clients find business and legal solutions for more than $87 billion of hotel transactions, involving more than 3,900 properties all over the world. For more information, please contact Jim Butler at firstname.lastname@example.org or +1 (310) 201-3526.
Jim Butler is a founding partner of JMBM, and Chairman of its Global Hospitality Group® and Chinese Investment Group™. Jim is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” and you will see why. Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.