Recap: Bisnow's NY Foreign Investment Summit: How International Forces are Transforming the Real Estate Capital of the World
On Tuesday, January 19, 2016, Bisnow hosted the New York Foreign Investment Summit: How International Forces are Transforming the Real Estate Capital of the World at New World Stages at 340 West 50th in NYC. Panelists discussed the important policies that have spurred growth in New York, why foreign investors are being drawn to the outer boroughs and how to bridge cultural gaps in business. Panel topics covered: Policy Impact: EB-5 & FIRTPA Reform, Bridging the Cultural Gap and Financing and Transactions.
Herrick Feinstein’s Real Estate Chair, Belinda Schwartz, moderated the “Financing and Transactions” panel.
Panelists included:
Niso Bahar - CFO of Alexico Group, LLC
Jeffery Dvorett - EVP and Head of Development for Kuafu Properties, LLC
Dean Shapiro - Managing Director at Oxford Properties Group
John Liang - Managing Director of U.S. Operations at ?Xinyuan RE Co., Ltd
Kai-Yan Lee - Managing Director of Vanke Holdings USA, LLC
Ms. Schwartz began the conversation by asking the panelists: “How do you feel about New York? Is it going to maintain its place as the capital of the world?”
"The Manhattan market was always very strong and is one of the strongest in the world. The strength comes from foreign investment. NYC is where you have the eco-system to do deals. Even in a recession, New York always did well and I believe it’s a trend that’s here to stay,” offered Mr. Bahar. Mr. Shapiro added: “I’m a New Yorker so I am biased and I have to agree. There are a handful of cities that emerged as truly global cities. Whatever downturn happens, here it will always be milder and shallower.”
Ms. Schwartz then asked about growth in areas beyond NYC. Mr. Liang offered: “Twenty years ago, there might have been investors from different countries coming in but New York has always been a very global city. In today’s market, the composition of investors may have changed but foreign capital is still coming in. We look at what is known as first-year countries or gateway cities. On the Northeast corridor, the gravity center is New York and this is attractive to Chinese investors, on the West Coast there is San Francisco, also cities like London or Paris, but historically, Asian immigration to Europe has not always been in the spotlight, sometimes due to language barriers so we are focused on these first-year cities for investment opportunities first, with a sidekick in Malaysia.”
On sovereign funds, Mr. Bahar commented: “After the financial crisis, commercial banks got lower on the leverage scale. In the next cycle, if real estate goes down, banking won’t be hurt but investors and sovereign funds are taking their risk.”
In response to Ms. Schwartz’s question to thoughts about ground-up construction in New York, Mr. Dvorett responded: “Ground up is very compelling. The challenge is we are not delivering products for two to three years. This cycle has shown clear winners and clear losers. You need street knowledge or local knowledge: know where the bus stops are, know the subway stops and how long waits for transport can be, be on the street to know which deals to underwrite.”
Mr. Lee offered: “One of the reasons we like NYC is the legal regulatory framework and the stability here. It’s very attractive. In terms of what we look for in a deal it’s savvy investors, demographics, local market conditions. We ask, is there future risk? Does the project make sense? Who are the partners? This is our selection criteria. High-end products with large units, for instance, move slower. We consider projects on a deal by deal basis and are always happy to look at portfolios.”
The panel discussed past and future trends in real estate, debt, equity, deal structures and advice for dealing with foreign clients. Mr. Lee offered: “From 2012 to 2016 we haven’t really seen tightening in liquidity but we have seen change. A strong credit rating, balance sheets and debt financing is key when working with foreign investors. ICBC is very active in lending to real estate which is a great opportunity for Chinese investors.”
“Hudson Yards cannot exist without a functional credit market. Sheer scale tests the limit of the credit market. It’s been educational. There are an interesting array of international players in the credit space.” added Mr. Shapiro.
“All the capital is coming in from different places. For us the level of stability in New York is unrivaled because of the diversity here.” said Mr. Dvorett.