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NY Real Estate Commercial
Manhattan Skyscraper Deal Is Latest for China Investors
From the Wall Street Journal of Mon, 08 Dec 2014 21:33:13 EST
A new tower being built on 7 Bryant Park on Sixth Avenue that the Bank of China has agreed to buy.
A new tower being built on 7 Bryant Park on Sixth Avenue that the Bank of China has agreed to buy. Cassandra Giraldo for The Wall Street Journal

In the past two years, Chinese investors have bought stakes in New York’s most valuable office tower, one of its largest development projects and the country’s most expensive hotel ever sold.

Next on the list: Manhattan’s newest skyscraper.

Bank of China Ltd. has agreed to pay nearly $600 million for 7 Bryant Park, a 28-story building being constructed on Sixth Avenue and 40th Street, according to people familiar with the matter.

The 470,000-square-foot tower, being built by a venture led by Hines, a Houston developer, and J.P. Morgan Chase & Co.’s asset-management arm, is slated for completion next year, when Bank of China would complete the transaction.

The deal comes as foreign investors have been pouring into top-quality New York properties, in part out of the belief that the city is a safe long-term bet, and that higher-end buildings will see values grow faster than less-flashy buildings.

Chinese investors sat on the sidelines for years, eyeing deals but rarely pulling the trigger. Recently, though, they have become more aggressive, as the government has encouraged its companies to spread money around the globe and the real-estate market in China has shown signs of weakening.

In all, Chinese investors have spent more than $5 billion on New York City properties since early 2013, according to data firm Real Capital Analytics, up from less than $300 million in 2012.

Chinese buyers also stand out because of the high-profile nature of their acquisitions. Among the recent purchases are the General Motors building, the country’s most valuable individual tower, in which Beijing-based developer Zhang Xin and her family bought a 20% stake last year.

Other investments include Greenland Holdings Group’s purchase of a 70% stake a 6,000-unit apartment development in Brooklyn by Barclays Center and Anbang Insurance Group’s $1.95 billion purchase of the Waldorf Astoria, by far the most ever paid for a hotel.

“Chinese investors appear to have a major preference for…more stable markets like New York,” real-estate services firm CBRE Group Inc. wrote in a report this fall. The New York region accounted for 78% of Chinese investments in U.S. commercial property between 2007 and 2013, CBRE found.

Now Bank of China is joining the ranks with 7 Bryant, which the developers initially had hoped would lease to top-quality corporations willing to pay some of the city’s highest rents.

But earlier this year, the bank approached the Hines team and began a lengthy negotiation to buy the property outright.

The purchase comes as the bank is growing quickly in the U.S., and it would mark a major upgrade from its current New York headquarters, a small, low-slung brick building at 410 Madison Ave.

The bank has adopted a more aggressive overseas strategy since its new chief, Tian Guoli , took over in early 2013, pushing for larger shares in foreign markets for lending and foreign-exchange trading.

For instance, the bank last year provided $4 billion to help finance Chinese firm Shuanghui International Holdings Ltd.’s buyout of U.S. pork producer Smithfield Foods Inc.

It has also pushed ahead with a competitive commercial-property lending arm, and its U.S. branch reported holding $5.4 billion in commercial property debt at the end of September. That is more than double the $2.5 billion it reported two years earlier, according to Trepp LLC.

For the developers, the sale marks the culmination of a risky bet on the Manhattan market, as they broke ground in early 2013 hoping to find tenants as they built the tower.

Instead of leasing the building, the developers were attracted to the Bank of China’s offering price.

While the nearly $1,300 a square foot being paid is shy of the more than $1,700 a square foot fetched by a handful of Midtown towers recently, that doesn’t include the cost of building out the office space for tenants, which could add $150 to $200 a square foot, people familiar with the deal said.

In addition, the deal, which is technically a long-term leasehold, doesn’t include the land under the tower. The land is owned by Pacolet Milliken Enterprises Inc., a limited partner in the tower.

Write to Eliot Brown at eliot.brown@wsj.com and Lingling Wei at lingling.wei@wsj.com



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