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, 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 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.’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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Chinese land grab
2009/02/11, 1:22 am
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Land Grab
Gady Epstein 02.02.09

Chen Yun’s parcels of land in Chongqing had everything a Chinese developer could possibly want. These former cornfields were to be easily accessible from the city center by a new eight-lane road. There would be enough space set back from traffic to provide China’s emerging middle-class customer a quiet, affordable enclave in a prospering interior megalopolis.

Chen, a 61-year-old son of peasants and self-made millionaire from this once rural area, planned four residential towers with a view of the Yangtze River, the highest of the four going to 20 stories. The $360,000 he paid for the 7 acres in 2000 seemed a bargain.

The problem was a powerful government official, Tang Wenfeng. Tang demanded Chen turn over some land he held next door to the 7 acres so that Tang could build his agency’s headquarters there. And then Tang came back for the rest. Chen fought back but would learn that it’s not what you own but who you know that matters.

“If I had known some powerful person, I would not have gotten such a bad result,” Chen says. “But that’s how I’ve always done business. I didn’t want to give a fat envelope under the table.”

For years popular dissatisfaction with land policy in China has focused on the forced relocations of the powerless for little compensation, as well-connected developers and their government patrons reap huge profits and take graft. Recently the government began moving to expand the land rights of farmers and to better define the scope under which land can be taken.

Chen’s case illustrates, though, that even wealthy developers can face the same plight as farmers. “How to use the land, what is the development capacity of the land and how much the land can earn—all this can be decided by the officials,” says Qiu Daochi, a former land resources official in Chongqing, currently a professor of geological science at Southwest University there.

In Chongqing that elite group of kingmakers long included Tang, a party cadre who as chief of an economic development zone wielded close to absolute power over land in his fiefdom, including Chen’s. “Tang was like the emperor of Rome,” says Li Xingchen, a Chongqing journalist and blogger who covers land issues and has followed Chen’s case closely. “No one could touch him. He had the power to decide everything.”

Chen tried to appease Tang by agreeing to hand over land for the zone’s headquarters. But in 2003 Tang would do to Chen, rich from a construction business and a nearby apartment complex he owns, what has been done to farmers in China for years: take his remaining land, 7.1 acres in all, in the name of “the public interest,” then turn over almost all of it less than two months later to another developer, Chen Liwei, for a sweetheart price of less than $2.5 million. Tang’s agency gave Chen back his purchase price of $360,000, plus $130,000 compensation, but Chen knew he had lost out on the fortune of a lifetime.

“I put too much trust in the Communist Party,” says Chen. “If we can’t trust government, who else should we trust?”

The central government itself reported, for a four-month period ending Jan. 15, 2008, 31,000 cases of official abuse involving 540,000 acres of land. Each year tens of thousands of protests and complaints against officials revolve around land disputes. Satisfactory resolutions are rare.

Chen had the wherewithal to sue, and he figured he had a strong case: He’d been told the land was needed for construction of the eight-lane road that was to border the property, and under the law, it should not have been resold. (Two economic development zone officials declined to comment on Chen’s case, claiming they weren’t familiar with the details, and Tang could not be reached.)

Zhou Xiaoyu, marketing director for the favored developer’s company, Bao Tian, said the land had been acquired “absolutely through proper channels.”

Suing would mean antagonizing the very bureaucracy that is so essential to making money in real estate. But, says Chen, “They really bullied me too much. Is that just because I’m not as close with Tang as other people? How could they grab the rice in my bowl to feed others?” Chen says. “I have my rules of doing business: One is not cheating others, and the other is not allowing other people to cheat me.”

Three times during his legal battle courts in Chongqing ruled that the government had acted improperly and that Chen should be given more compensation for his land. Last year one finally set what Chen considered a paltry award of $2 million. The government appealed the ruling.

Then authorities went after Chen’s nemesis, Tang, one of nine Chongqing officials in land-related jobs to be investigated for corruption in the last year. Tang appeared last Nov. 7 in court and confessed to abuse of power in accepting more than $1 million in bribes from two construction companies, as well as embezzling $30 million and conveying much of it to the two companies. (This case is unrelated to Chen Yun’s land dispute.)

In his confession statement Tang said he had been arrogant and willful and deserved punishment. Now 60, Tang was sentenced in late December to a life term in prison to cap his career.

Would having his opponent put down for corruption do anything to help Chen or hurt his rival developer, Chen Liwei? Hardly. The government moved last year to revoke, retroactively, Chen’s original claim to the property, and in October a Chongqing court endorsed the state’s creative maneuver, ruling that Chen never had legitimate rights. Chen doesn’t have to return his original compensation of $490,000, but he no longer stands to receive the $2 million awarded him in 2007.

Today the land is overgrown with brush and weeds, literally overlooked by the economic zone headquarters that was built on the neighboring land Chen had agreed to give Tang seven years ago. Bao Tian plans to build a hotel, shopping mall and office complex on the property in 2010.

For now Bao Tian has some apartments to sell next door; to do the job they have built a grandiose sales office on one corner of Chen’s former property. Chinese employees stand at attention dressed in some fanciful approximation of Buckingham Palace guards, watching over a manicured faux-European garden and fountain. The advertising promises, in English, “rejuvenation of the life intent.”

Murky property rights, arbitrary rules on development, eminent domain used to benefit not the public but private interests—Chinese land law sounds so foreign. In fact, though, all these are features of American law. The difference is in degree—and then there’s the fact that in Chinese legal disputes, the government wins virtually whenever it really wants to. Chen learned that lesson the hard way.

Additional reporting by Li Jie.

International interest grows in US lending
2009/02/10, 7:12 pm
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The Association of Foreign Investors in Real Estate (AFIRE) reports that foreign real estate lenders could grow lending by as much as 58 percent in the United States this year, with interest in cross-border property investing especially robust.

In a recent AFIRE member survey, the top five most attractive U.S. cities in terms of investment dollars were the District of Columbia, New York City, San Francisco, Los Angeles and Houston.

Meanwhile, 53 percent ranked the United States as the nation providing the most secure property investments.

Respondents also listed multifamily housing, office space, industrial properties, retail, and hotels as the top five preferred property types.

Source: National Mortgage News, Bonnie Sinnock (02/09/09)