ESTATE


China rejects conglomerate powerhouse Coca Cola in 2.4 Billion Buyout Bid
2009/03/19, 3:07 am
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Coke’s China juice move collapses

 

China has rejected a $2.4bn (£1.7bn) bid by Coca-Cola for the country’s biggest maker of fruit juice, the government has said.

The sale of Huiyuan Juice Group would have been the largest takeover of a Chinese firm by a foreign rival.

But rival juice makers had said the deal would give Coca-Cola too much dominance in China’s beverage market.

And nationalists had called on Beijing to ban foreigners from buying one of China’s most successful brands.

Key test

Last year the Chinese government introduced tough anti-monopoly laws.

Investors had been waiting for the Ministry of Commerce’s decision on whether the Huiyuan deal could go ahead as a test of China’s attitudes towards overseas investment in the wake of the new legislation.

A report in the Financial Times said that Coca-Cola had been considering abandoning the deal because regulators would insist that the Huiyuan name, a well-known brand throughout China, was given up.

“If Coke can’t own the Huiyuan brand it is difficult to be optimistic about a successful completion of this deal,” the FT quoted an unnamed person “close to the deal”.

Huiyuan has about a 40% share of the Chinese juice market.



Drywall from China blamed for problems in homes
2009/03/17, 2:20 pm
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Real estate agent Felix Martinez thought he’d found his dream house when he bought the 3,500-square-foot beauty in Homestead, Fla., two years ago.

Then, he says, his large-screen TV mysteriously failed. Next, the air conditioner went. His bath towels smelled like rotten eggs. Visitors noted an odor in the house. Martinez says he’s suffered new sinus problems and sleep apnea. His wife and son sneeze a lot.

The walls in the home, a recently filed class-action lawsuit alleges, were built with the same kind of Chinese-made drywall that tests have shown emit sulfur gases that corrode copper coils and electrical and plumbing components.

Similar problems have been linked to hundreds of Florida homes. Tens of thousands of homes there and in other states could be affected, say lawyers who have filed lawsuits on behalf of Florida homeowners. The discovery has created a firestorm that’s engulfed an international building supplier, large and small home builders and dozens of subcontractors. The issue also has revived concerns about quality-control procedures of U.S. companies that use Chinese-made products, following episodes in recent years involving contaminated toothpaste and pet-food ingredients, lead-tainted toys and defective tires imported from China.

A leading U.S. home builder, Lennar, and a Chinese drywall manufacturer, Knauf Plasterboard Tianjin, say tests show the gases given off by the drywall pose no health hazards. Florida regulators and the federal Consumer Product Safety Commission are investigating.

Lawyers say far more testing needs to be done.

“If it can put holes in metal coils, how do we know it doesn’t cause problems in children or adults?” asks attorney Jeremy Alters of Florida-based law firm Alters Boldt Brown Rash Culmo. Alters says he has clients who developed respiratory ailments “out of the blue” after moving into allegedly affected homes.

Knauf says Chinese drywall imports started in significant amounts in 2005 as a result of a shortage driven by the booming housing market and rebuilding after Hurricanes Katrina and Wilma.

In addition to lawsuits on behalf of Florida homeowners, a class-action lawsuit was recently filed by an Alabama home builder that has made air conditioning repairs on two dozen Alabama homes, says attorney Steven Nicholas. A class-action lawsuit has also been filed on behalf of Louisiana homeowners.

Lawyers say they’re investigating more complaints in other states and Florida.

“We know for a fact that this product is in Virginia, Louisiana and California,” says Charles LaDuca, of Washington, D.C.-based law firm Cuneo Gilbert & LaDuca. “The breadth of the problem is just unfolding.”

Investigations began in 2004

So far, Florida is ground zero. Up to 1,000 homes in the southern part of the state may be affected, says Jack Snider, president of American Management Resources Corp. (AMRC). Working for homeowners and builders, the environmental consulting firm has tested drywall for gases and checked homes for odors and corrosion.

AMRC first began investigating odor complaints in 2004 and found drywall to be the cause. Because most drywall doesn’t identify its origin, Snyder says, it took until 2006 before foreign-made drywall became the focus.

Homeowner lawsuits allege that the drywall has corroded air conditioning and refrigerator coils, microwaves, computer wiring, faucets and copper tubing.

Tests paid for by Lennar say the drywall appears to emit sulfur gases that can damage air conditioning coils, electrical plumbing components and other material.

In one test, copper pipe turned black after four weeks when placed in a sealed container with a piece of affected drywall, according to a lawsuit filed Jan. 30 by Lennar against Knauf Gips of Germany and its Chinese affiliate, Knauf Plasterboard Tianjin, and others. The pipe then started to corrode, Lennar says.

Lennar alleges that Knauf produced “defective” drywall. It also says subcontractors put it in homes without Lennar’s knowledge. Lennar has said it has more than 80 affected homes in Florida and dozens more under review. It is relocating residents while it installs new drywall in homes.

“Lennar stands alongside its homeowners as a victim,” its lawsuit says.

Plaintiffs’ attorneys say residents have suffered a host of health issues, including rashes, new allergies, asthma and sore throats. Along with receiving compensation, they should be monitored long-term for health issues, says attorney Ervin Gonzalez of Colson Hicks Eidson. “This has been an economic, physical and emotional problem for victims,” he says. Based on import records, he estimates that up to 60,000 U.S. homes may be affected, with about half in Florida.

Testing air

Drywall is made from gypsum, a mineral. Manufacturers also make synthetic gypsum by processing residues produced by coal-burning power plants.

Normally, drywall doesn’t smell or emit sulfur gases, says Nancy Spurlock, a spokeswoman for National Gypsum. It doesn’t import drywall or ingredients from China, she says.

Lennar, which refused interview requests, says it discovered the issue after noticing frequent air conditioning problems in homes.

Its consulting firm, Environ International, tested air in 79 affected Florida homes late last year and found sulfur compounds at levels well within health and safety limits or on par with outdoor air.

Knauf’s testing firm, the Center for Toxicology and Environmental Health in Arkansas, recently tested 20 Florida homes with discolored wiring.

It found results similar to Environ’s, says toxicologist Phillip Goad, who oversaw his firm’s testing. Levels of carbonyl sulfide were in the range of salt marsh air. Exposure to carbon disulfide were well within safety levels set by The National Institute for Occupational Safety and Health.

At higher concentrations than found in the homes, carbonyl sulfide can irritate eyes and the respiratory system, and have other effects, says Goad. Carbon disulfide can produce symptoms including irritated eyes, headaches and fatigue.

The Consumer Product Safety Commission dispatched staffers to Florida late last month to investigate and will do health hazard testing, says spokesman Joe Martyak.

The Florida Department of Health is also testing. Its website says it has not “identified data suggesting an imminent or chronic health hazard at this time.”

In January, the state inspected 12 homes built from 2004 through 2008 to assess possible health hazards and set up more sensitive testing protocols. Results are pending, it says.

Mine was changed in 2006

Knauf says odor complaints about its Chinese drywall surfaced in 2006. Its investigation determined that the drywall smelled like drywall made from natural gypsum in China. The drywall from one China mine used by Knauf contained iron disulfide, a naturally occurring mineral. That would account for the smell, Goad says.

Knauf says it stopped using the mine — which other manufacturers also used — in late 2006 after the issues arose. It says it’s being “unfairly” tainted because it labels its imported drywall from China while others do not.

Knauf says it was responsible for just 20% of the Chinese drywall that came to the U.S. in 2006. It also says that Lennar has identified homes with odor and copper issues that included non-Knauf drywall.

Consultant Snider, too, says that other drywall makers “have not been as noticed as Knauf.”

Lennar and Taylor Morrison, a home builder based in Arizona with a dozen affected Florida homes, say they’re absorbing the expenses of relocating residents for the several months it can take to repair affected homes.

Lennar says it used the Chinese-made drywall in a small percentage of Florida homes built from November 2005 through November 2006. It’s not being used in new homes, it says. Lennar and Taylor, both of which build homes outside of Florida, say they’re not aware of homes outside of Florida being affected.

South Kendall Construction of Florida built Martinez’s home. The company is still assessing the situation, according to its attorney, Kieran Fallon. It has tested several dozen Florida homes and expects about 50 to have problems, he says.

Martinez says he can’t afford to rent another place while South Kendall figures out what to do. “We’re caught between a rock and a hard place,” he says.

Karin Vickers, a 45-year-old certified public accountant, is in the same situation.

She bought her Homestead, Fla., home across the street from Martinez, also in 2006, for $485,000. “I love the house,” she says. But the air conditioning didn’t work properly and was just replaced. Her TV also failed after a year. Her wall sockets turned black, and her bathroom smells like burned matches, she says.

Even if her house is repaired, she worries that issues could crop up again.

The real estate crash has knocked her home’s value down about one-third, Vickers estimates. “It’s dropped more now because of this,” she says.

http://www.usatoday.com/money/economy/housing/2009-03-16-chinese-drywall-sulfur_N.htm



US real estate a bargain for Chinese
2009/02/17, 3:31 pm
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With U.S. home prices so depressed, the Chinese are coming
The Associated Press
updated 1:37 p.m. ET, Thurs., Feb. 12, 2009
BEIJING – Beijing lawyer Ying Guohua is heading to the United States on a shopping trip, looking not for designer clothes or jewelry, but for a $1 million home in New York City or Los Angeles.

He expects to get a bargain. Ying is part of a growing number of Chinese who are joining tours organized especially for investors who want to take advantage of slumping U.S. real estate prices amid a financial crisis.

“It’s a great time to buy because of the financial crisis, and houses in large cities like New York and Los Angeles will definitely go up in a few years,” Ying said. The home is an investment, but he’s also planning long-term: He hopes his 5-year-old son might use it if he goes to college in the United States.

While China’s ultra-rich have been buying property in the U.S. for years, the buying tours are new, made attractive by still-rising Chinese income levels and American real estate prices that have been falling for two and a half years.

More than 100 Chinese buyers have joined such tours since late 2008, according to Chen Hang, the China-born vice president of real estate at Fortune Group. The Pittsburgh, Pennsylvania, company shows foreclosed commercial property to Chinese buyers.

“The Chinese are going to seize the opportunity to take advantage of some great deals,” Chen said.

Ying, the Beijing lawyer, is one of 40 investors going to New York, California, Boston and Las Vegas on a Feb. 24-March 6 tour organized by Beijing-based SouFun Holdings Ltd., a real estate Web site. SouFun plans to show participants foreclosed properties priced at $300,000 to $800,000.

“We never thought these tours would garner such interest, but we’ve had an overwhelming response,” said SouFun CEO Richard Dai. “Before, we heard of Chinese or Hong Kong movie stars buying homes in the U.S., and now more and more Chinese can afford to have the same.”

The home-buying opportunities mirror a larger trend. Cash-rich Chinese companies are looking to buy resources made suddenly cheaper by the downturn or companies suffering under the global debt meltdown. On Thursday, the Aluminum Corp. of China, also known as Chinalco and the world’s leading aluminum producer, invested $19.5 billion in debt-burdened global miner Rio Tinto Group — China’s biggest overseas investment to date.

Because the authoritarian government has imposed controls limiting China’s exposure to international capital flows, the country has largely avoided the worst of the global financial crisis. Meanwhile, high-level incomes have continued to rise. China had the world’s fifth-largest population of millionaires in 2008 with 391,000, up 20 percent from the previous year, according to Boston Consulting Group.

But Chinese with money in the bank have few good investment options at home. Real estate prices have cooled and stock prices peaked in October 2007 after a two-year boom that saw shares rise six-fold in value. After years in which foreign money poured into China to take advantage of the hot economy, economists estimate that tens of billions of dollars began leaving the country in the last three months of 2008 as Chinese investors began bargain-hunting.

Chinese buyers are looking at both commercial property and homes to rent out or use on business trips. And the U.S. has plenty of unsold homes to offer — 3.67 million as of the end of December, according to the National Association of Realtors.

Many buyers are unfamiliar with U.S. markets, so they focus on well-known ethnic Chinese neighborhoods, according to John Wu, president of the Chinese American Real Estate Professionals Association in San Gabriel, Calif.

Lion’s Property Development Group in New York City organizes Chinese groups to visit New York homes. The company also treats visitors to Broadway shows and famous restaurants in hopes that they will take to the city and buy a $1 million to $2.5 million home.

Trips are pricey. Ying, the lawyer, paid $2,200 — nearly the equivalent of the annual income for many Chinese — plus airfare.

Participants in a 10-day January tour organized by Beijing-based Environment International Travel Agency had to show proof of an annual income of at least $30,000 and that they owned a car and property in China.

A real estate developer from the southern city of Changsha said he spent $3,500 for the 10-day trip to view $500,000 to $1 million homes, and it worked.

He found a house in California’s Silicon Valley that he planned to buy for his 20-year-old daughter, a university student in Boston who plans on attending graduate school in the Bay area.

“My daughter’s monthly rent is $1,000, so it makes sense to buy a place, because I’m getting a return rather than throwing money away,” said the developer. He would talk on condition that he be identified only by his surname, Zeng.

The price of the house, he said, was $1 million, compared with $1.3 million before the crisis in early 2007.

“The price is low now, but it’s in a good neighborhood with breathtaking views, so it will definitely appreciate,” he said.



Chinese house hunters tour U.S. in search of sweet deal
2009/02/11, 1:44 pm
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Updated 2/11/2009 2:39 AM ET
By Calum MacLeod, USA TODAY
BEIJING — A special Chinese tour group is heading to the United States later this month to go bargain hunting for houses at foreclosure prices.
More than 40 affluent house hunters from across China will begin a trip to Boston, New York, San Francisco and Los Angeles on Feb. 24 in search of cheap homes to buy. Their goal: to find investment property and housing their children could use when they go to the USA to study or work. Their budget: $300,000 to $800,000 apiece.

“U.S. house prices are lower now, and we’ll also be looking at low-price houses auctioned off by the courts,” says Zhao Xinyu, a manager at Soufun.com, China’s leading real estate website and the trip’s organizer.

This is the first overseas buying trip for the real estate firm, whose name in Chinese means “search house” and which has organized house-hunting trips inside China. It may not be the last.

“We won’t force our clients to buy,” Zhao says of this first group of bargain hunters, who are paying $3,600 each for the trip. “But if it’s successful, we’ll organize several more trips this year.”

Hunting for businesses, employees, too

Cash-rich China, whose purchases of U.S. Treasury notes help prop up the federal government, is looking to recession-stricken America for more than just houses at the right price.

Chinese companies are on the ground looking for U.S. firms on the skids, says David Putnam, head of Asia for Houlihan Lokey, a Los Angeles-based investment bank that specializes in financial restructuring. They’re looking for people, too.

“We are aware of a number of Chinese strategic players who are interested in acquiring distressed U.S. assets in a number of industries,” says Putnam, who is based in Hong Kong. “They have people looking on their behalf, and they are sending people over to visit.”

In the last two months, headhunters have been scouring America’s decimated financial sector mostly for ethnic Chinese executives. Twenty banks from the Chinese financial capital of Shanghai toured in December in search of talent, the China Daily newspaper reported. Last month, the Chinese government dispatched recruiters to New York and Chicago for 1,700 people to help build the country’s nascent financial services industry.

But houses are assets that individual Chinese with money can try to cash in on.

“Once Chinese accumulate some capital, we want to find an outlet,” says Shen Yue, a Chinese film producer. “China is growing richer, but this is still a country run by the Communist Party, which inherently distrusts private property. The party’s power is more than the rule of law. That is scary, and we cannot be sure about changes in the future. The U.S. market and social system are more stable.”

Shen, who already owns four houses in Beijing and Shanghai and who hasn’t been to America, says he wants to take a future Soufun.com house-hunting trip to the United States and spend up to $500,000 for a house.

There appear to be plenty of others like him. Soufun.com’s trip to the USA originally was planned for January, but it was delayed because the number of applicants outnumbered the spots on the tour tenfold. The tour targeted Boston, New York, San Francisco and Los Angeles for the potential buying spree because of their large ethnic Chinese communities and because they have a large number of universities.

Although individual Chinese have been buying property in the USA for several years, this is the first organized group trip, says professor Wang Hongxin, director of the Real Estate Research Institute of Beijing Normal University.

“This is a good experiment,” Wang says of the tour. “For despite the recent price falls, the market in the U.S. is more stable and civilized (than China). This is a high-income group who want a new investment, or a new lifestyle, and a house near a university for their children. In the future, there will be more Chinese heading to the USA to live and work.”

Buyers beware

Wang contends, however, that China’s housing market may be a better investment than America’s.

“The Chinese real estate market has the greatest potential worldwide,” he says. “Currently, it is not as hot as in previous years, but the rates of return will still be higher than other markets.”

He also warns, “Some of the group (of Chinese buyers) may underestimate the challenges of investing overseas, as they are unfamiliar with the U.S. culture and system.”

Dan Harris, a Seattle lawyer and co-writer of the popular China Law blog, echoes those concerns.

Many potential buyers, Harris says, “believe that by buying property in the U.S., it will increase their chances of getting a visa — but it won’t.”

Harris also worries Chinese buyers may end up with the wrong kind of bargain, such as a foreclosed crack-house. “It’s like an American going over to Shanghai to buy property, and we have had many horror stories there,” he says.

Shen, the film producer, sees only an upside.

“After the subprime crisis, U.S. houses are down by 20% or 30% — even more than the price falls in China,” he says. “I just need to find the right channel to invest.”

The way Shen sees it, the Chinese may be a big help to Americans saddled with mortgages they cannot pay. He says there are several hundred thousand Chinese like him who easily can pay up to $500,000 for a house.

“We are a huge market for the USA,” he says.

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