Chinese investors up outbound investment
 
Chinese investors up outbound investment
03 OCTOBER 2014 1:25 PM
Firms from China are searching the world over for hotel investments of all shapes and sizes.
GLOBAL REPORT—Chinese capital increasingly is flowing beyond the country’s borders and into hotel sectors worldwide.
 
The Americas, Europe, Middle East and more all have seen considerable investment in their respective hotel industries during the past few years. Institutional investment by Chinese firms in properties overseas rose by 17% during the first half of 2014, according to JLL’s Hotels & Hospitality Group.
 
A few examples:
 
  • Shanghai’s Greenland Group purchased for $150 million the “Metropolis” site in Los Angeles in 2013. The mixed-use development will include a 350-room Hotel Indigo.
  • In Australia, Greenland also said it was eyeing between $3 billion and $4 billion of additional projects in tourism, infrastructure and agriculture, on top of its existing $1.5 billion in projects in Sydney and Melbourne, according to a report in The Australian. 
  • China’s Export-Import Bank financed a $2.4-billion loan for the Baha Mar resort on Cable Beach in Nassau, Bahamas. China State Construction and Engineering, the country’s largest contractor, is investing another $150 million in the project.
  • Chinese investors purchased €3.1 billion ($409 billion) of commercial properties across Europe in 2013 and €978 million ($1.3 billion) of real estate in 2012, according to data compiled by Real Capital Analytics
  • The Industrial and Commercial Bank of China this year is boosting lending to Dubai, United Arab Emirates, real estate projects, according to Bloomberg. In January, it advanced $201 million to Dubai-based real estate investment company SKAI Holdings for the development of a hotel on the Palm Jumeirah.
 
Speaking during the Hospitality Asset Managers Association’s fall meeting last month in Miami, Scott Berman, U.S. leader, hospitality and leisure at PricewaterhouseCoopers, said these Chinese firms are likely to continue investing.
 
“The Chinese are very interested in real estate projects,” he said. “There’s interest in iconic projects. Their behavior will be driving a lot of what we read about.”
 
Investment preference
William Dong, president and CEO of Best Western (China), has seen firsthand this increased interest in overseas investment from the company’s headquarters in Beijing. He said he expects investment activity to increase.
 
“(The Chinese are) much more active than before as they have seen the growth of Chinese travelers traveling aboard, and they think they can (cater to) this business,” he wrote in an email, adding that hotels that include a serviced-apartment component are particularly attractive to investors in China.
 
Messages left at several recently active Chinese investment firms, lenders and construction companies were not returned prior to deadline.
 
Raleigh, North Carolina-based Alliance Hospitality Hotel Management has been in discussions with several large Chinese investment groups regarding a potential joint-venture partnership arrangement. The firms are seeking exposure to the U.S. hotel sector, Alliance Chairman Rolf Tweeten said.
 
Tweeten declined to identify the firms or the nature of the potential agreements that might take place. He said deals with Chinese firms can take time.
 
“They appear to be very engaged in a joint venture and then you don’t hear from them for a period of time,” he said. “You have to be patient.”
 
Further, Tweeten said the investors are unlikely to call upon a broker to find a deal. “They want personal relationships,” he said.
 
He said he has perceived a shift in the type of hotel Chinese investors will plug their money into. In the past, the investment firms were all about large, iconic properties. While those sorts of hotels still receive investment, investors also are willing to consider a select-service asset as long as the property is located in a prime urban location.
 
“You see them coming out of that comfort zone (of full service),” Tweeten said. “They’re looking at top 40, top 20 destinations for hotels.”
 
Marty Collins, founder of Gatehouse Capital Corporation, said Chinese investors are on a mission to invest elsewhere to glean investment best practices. 
 
“The Chinese quest for investment, but not simply diversified investment, but also for them to be able to acquire best practices, processes and systems that are done in a lot of the world but not in China,” he said.
 
Sources also pointed to Chinese firms wanting to expand beyond China due to that country’s gradually slowing gross-domestic-product numbers. China’s GDP in 2013 totaled $9.2 trillion, according to the World Bank. Analysts at Barclays expect China’s GDP growth to underperform in 2014 as well as 2015, with 7.2% and 6.9% growth expected, respectively, according to Barron’s
 
“There’s a continued risk of a slowdown in China,” Berman said. 

HNN's Patrick Mayock contributed to this report.
 

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