Terry Wong | Courtesy Great China International Holdings | ATA China Holdings Group

Hong Kong Capital vs. Chinese Capital in the SoCal Market

Carrie Rossenfeld Finance & Capital Markets

While the Hong Kong real estate market continues to heat up with diminishing yields and returns, Brexit uncertainty, and other global markets appearing priced in, Hong Kong investors are increasingly looking to invest in U.S. commercial real estate, Terry Wong, chairman of Great China International Holdings | ATA China Holdings Group, tells SoCal Real Estate. The Hong Kong-based firm holds interests in real estate and the health and green industries.

Wong says Hong Kong investors have different priorities in the US real estate market than Chinese investors — who tend to get a lot of press here — do. “While Chinese investors are rebalancing their portfolios with China maintaining capital controls, Hong Kong investors are increasingly deploying capital to diversify abroad.”

He adds that multiple years of steady job growth and the strengthening U.S. economy — albeit at a moderate rate — makes the Southern California commercial real estate a safe bet for Hong Kong investors looking to diversify their portfolios and generate returns outside Hong Kong.

Additionally, Hong Kong capital differs from Chinese capital in terms of how and where it is placed in Southern California. Wong says Hong Kong capital flowing into the U.S. commercial real estate market is dominated by Hong Kong family offices and are mostly family monies. “That is why they tend to be more cautious and affluent risk-taking: they are looking for incoming-producing properties with upside, ranging from $30 million (U.S.) to $500 million (U.S.), and they are seeking a more long-term span for their investments.”

These investors are mostly second-generation members of the Hong Kong Chinese families that have substantial, long-term experience in real estate investing, says Wong. For Chinese capital, the dominant players are state-owned enterprises (SOEs) and super-high-net-worth investors (HNWs), who are all subjected to governmental capital-control measures, but they are more aggressive with their investments, which are mainly placed in offices, logistics properties and/or trophy assets priced at $150 million and above.

“Currently, (these investors) are particularly susceptible to political pressure to reduce speculative real estate investments in commercial properties (e.g., Chinese companies such as Anbang, HNA, etc.), says Wong.

Stay tuned for SoCal Real Estate’s complete interview with Wong in the July issue of our print magazine.