Asian investment capital making a beachhead in US real estate
Asian money -- especially Hong Kong flight capital and funds from wealthy merchants in countries such as the Philippines -- is flowing into American real estate markets. Exchange controls and other curbs imposed by Asian governments are restricting flows of these investments, but real estate and investment specialists say the trend is apparent.
Of the estimated $8 billion in foreign investment in the United States, about $6 billion, according to the Department of Commerce and other sources, is in real estate. Of that, one-third is land and realty developed or owned by Asians.
Still, at present the effect is rather modest. James Mooney, vice-president of Landauer, a New York real estate firm, notes that Asian real estate investments are not yet ``driving up prices, but no foreign money in the US market is doing that now.''
Michael Goldberg, a real estate specialist at the University of British Columbia in Vancouver, has traced the patterns of this investment by Asians.
``In most cases,'' he says, ``they want to preserve family wealth and see minimal downside risk in the US and Canada.'' Their assumptions ``are not based on an urge to achieve very high returns very quickly.''
``It's cautious money, seeking diversification,'' agrees Joseph Bagby, president of the National Association of Corporate Real Estate. ``More big banks and trust departments are handling it than ever before.''
Until recently, most Asians concentrated on a string of glamour cities -- Houston, Los Angeles, Boston, and Toronto. Today, the preference appears to be high-technology areas, whether in those traditionally favored cities or not.
And a new breed of Asian speculator is involved, replacing the traditionally tight-knit West Coast Asian-American clans. More investors are forming partnerships with non-Asians and are well versed in construction, hotel ventures, and facilities management.
Having experienced volatile property markets in East Asia during the 1970s, they are transplanting lessons to North America.
Until the early 1980s, most activity was on the West Coast; it concerned city apartments. Gradually, agricultural holdings were added to portfolios, real estate specialists say.
The deals are becoming larger in scope. Tang City in Houston -- where until recently most Asian funds went for oversize parking lots -- is a $200 million-plus mixed-use project. It features a Chinese department store.
Since the early 1980s, Pacific Rim investors have scoured Miami and much of the Atlantic Coast. ``They like resort areas, too,'' a construction company vice-president in St. Louis says. ``Awhile back, if they heard the Saudis or Kuwaitis were in an area, they took to it themselves. Now they think on their own.''
In 1982, the Japanese Daiei conglomerate teamed up with the US-based Equitable Life Assurance to develop the $300 million Ala Moana Center outside Waikiki, Hawaii.
It offers nearly 2 million square feet of space and ranks as Hawaii's largest shopping mall. Throughout Hawaii, Japanese realty totals more than $750 million. It is concentrated in hotels, golf courses, and commercial sites -- the same sorts of assets held by other Asian groups.
Hong Kong Land financed Vancouver's Mandarin Hotel, and a few blocks away, Japan's Tokyu Corporation channeled $110 million into its own hotel. Mandarin Hotel manager Ian Barbour cites the city's stable climate, ``which is appealing to many types of Asian would-be investors.''
In Atlanta, Singapore's Toh Group proposed an office and commercial complex, but friction resulted when citizens refused to part with land needed for these projects. Toh did establish an industrial park in the area, but controversy over the downtown venture might sour future relations.
Landauer's Mr. Mooney thinks pension fund money from Japan will soon be active in US real estate. Others believe that joint ventures with American developers will characterize deals in 1986.
Professor Goldberg points to another issue: bias against Chinese ethnic groups in some countries outside the US. ``The overseas Chinese community throughout the Pacific Rim feels threatened,'' he says, ``and they have money to invest.''