China Real Estate -- The Second Tier Is First Rate
This is the third in my series of posts on the recent China Real Estate seminar I attended last week in San Francisco. For my first two posts on this seminar, click here and here.
This post is on a group session on "Second-Tier City Investment Strategy in China." I acted as moderator for this session and I can objectively state (because I had almost nothing to do with the substance of the presentation) that this presentation was fascinating. The powerpoint presentation contains all sorts of valuable information and anyone with an interest in second tier Chinese cities (not just for real estate) should check it out here [pdf].
The presenters were R.A.D. (pronounced, Rad, as in "like, radical, dude") Morton III and Paul Silverman from Asian Development Group and Michael Lam, a director of Cushman & Wakefield's Asia Pacific operations, All three of these people brought real world, on the ground, China real estate experience to their presentation. In spades.
R.A.D. and Paul focus on developing community retail in China, in second tier cities. They frequently lease these properties out to Wal Mart or Carrefour as an anchor tenant and then bring in both domestic and foreign retailers to fill out the rest of the space. Both R.A.D. and Paul went to China around four years ago armed with mountains of real estate experience and knowledge and taught themselves China.
Micheal Lam spent seven years in Shanghai and now helps head up Cushman & Wakefield's Asia Pacific operations, with his main focus being China. Michael has a degree in international business and he is fluent in Chinese. His focus is on advising clients on their Asian real estate portfolio and helping to oversee their real estate strategy implementation.
Because I was on stage moderating during the session, I was unable to take notes so I am forced to refer everyone to the powerpoint, which actually does a very good job of conveying the essence of the talk. I do remember Paul at one point remarking on how things get done in China because most politicians there engineers, not lawyers, which forced me to note that Jimmy Carter was an engineer and he was the worst President in U.S. history for the real estate industry (probably every other industry as well). In Paul's defense, he conceded my point about Jimmy Carter.
Do check out the Powerpoint.
Comments (8)
Read through and enter the discussion by using the form at the endnanheyangrouchuan - May 11, 2007 2:52 PM
Yeah, that was one heck of a sales slide show. I notice there were no pics of Chongqing, but then again clear skies are pretty hard to find there.
So if you didn't get enough of speculating or flipping in the US or UK, now you try China. Just wait until those investors try to get an honest appraisal, hahaha.
nanheyangrouchuan - May 11, 2007 6:10 PM
I also take odds with the real estate presentation promoting "local talent" for outsourcing while multiple business magazines discuss the painful lack of talent (and the extremely high price of existing talent) in China.
foreign expert - May 12, 2007 9:35 AM
They also have several slides boasting about their about "guangxi", which seems a bit suspicious to me.
China Law Blog - May 13, 2007 10:15 AM
nh --
Sounds to me you do not like capitalism and since we know you do not like communism either, I guess that leaves feudalism.
China Law Blog - May 13, 2007 10:17 AM
Nh(ii) --
There is a painful lack of local talent and the cost is rising. But, it is still often absolutely necessary and still less than U.S. wages.
China Law Blog - May 13, 2007 10:22 AM
foreign expert --
I would completely agree with you, but at the presentation itself, they made clear that all they meant by "Guangxi" was the need to get to know the people with whom you work and build relationships with them.
foreign expert - May 14, 2007 4:36 AM
Capitalism does not have to mean artificially inflating house prices to the extent that regular people cannot afford them: and then those normal people who take huge risks borrowing money end up getting caught in negative equity when the market crashes.
I have no doubt that the chinese government will be watching this process in the west very closely, and trying to figure out ways of avoiding this happen in the chinese market.
It is this, and not the possibility of flipping investments or buying off plan that makes investing in the chinese real estate market a good idea. Then again, you can guarantee that the government is not going to care a damn about the interests of foreign speculators. Thats what concerns me about these new laws: the government could change them at any time.
China Law Blog - May 14, 2007 11:35 PM
foreign expert --
You are absolutely right that the Chinese government does not "care a damn about the interests of foreign speculators" and could change the laws (and probably will) at any time. It amazes me to hear investors speak with confidence based only on the fact that the government has let them put their money in the country. We have a saying in our office: easy to invest, hard to get out.