A Beijing-based developer took control of a lot slated for more than 200 units of housing near New York’s Brooklyn waterfront, a deal the company says is the first of its kind by a Chinese firm in the U.S.
Xinyuan Real Estate Co. last month bought the 2-acre (0.8-hectare) parcel at 421 Kent Ave. in the Williamsburg section for $54.2 million, said Omer Ozden, who advised the company on the purchase. Under Chief Executive Officer Yong Zhang, Xinyuan has built more than 21 million square feet (2 million square meters) of housing in second-tier Chinese cities including Hefei, Zhengzhou and Chengdu, according to the company’s website.
Brooklyn is luring investors including Invesco Ltd. and Sam Zell’s Equity Residential as demand for housing soars in New York’s most populous borough. Xinyuan’s acquisition, made as China’s government limits domestic property purchases, was the first by a Chinese company of a U.S. site planned for more than a few units, according to data from Real Capital Analytics Inc. going back to 2000.
“There’s no question that China wants its domestic companies to spread their wings around the world,” said Dan Fasulo, head of research at New York-based Real Capital, which tracks global commercial-property transactions. “This firm is no joke. Many Chinese real estate developers are looking overseas almost as a training ground for their people, to bring best practices back home.”
Xinyuan, which plans to market the units as condominiums, considered several projects in the New York area before making the Brooklyn purchase, according to Tom Gurnee, the company’s Beijing-based chief financial officer.
“We selected it for its attractive price, trendy location with restaurants and nightlife, its proximity to Manhattan, and its readiness for vertical construction in a relatively short period of time,” he said in an e-mail.
The Kent Avenue site, two blocks south of the Williamsburg Bridge, had been taken over by a local investor, Richard Kalikow, after he foreclosed on the previous owners earlier this year, making the property available for less than the market price, Ozden said in a telephone interview from Beijing.
The deal was also appealing because the prior owners had already done about $8 million of work on a condominium project, Ozden said. The foundation and some plumbing were completed before the death of a development partner, Chaim Lax, halted construction, Kalikow said in a telephone interview.
The Chinese government in the past year has restricted multiple purchases of its real estate by individuals, aiming to slow price growth and avoid a collapse. The curbs have spurred buyers to seek deals abroad, Ozden said.
“This year, there’s been approximately $9 billion-plus invested from China into the United States real estate market, and it’s been almost all individuals, typically individuals buying up one, three, five homes at a time,” Ozden said, citing data from the National Association of Realtors. “There’s a massive opportunity here.”
Investors are focusing on U.S. cities that appeal to mainland Chinese residents, such as New York, Los Angeles, San Francisco and Miami, he said.
Xinyuan, which made two smaller investments in the U.S. earlier this year, will continue to search for development projects on the East and West coasts that are “offered at favorable prices and that are attractive to potential buyers from China,” Gurnee said.
The former owners’ original plan for the Brooklyn site was to market the 216 units to Hasidic Jewish families, said Robert Knakal, co-founder of New York-based Massey Knakal Realty Services. Southern Williamsburg has been an enclave for Hasidim since many emigrated from Hungary following World War II.
Under a deed restriction limiting the number of units, the apartments were designed to average about 2,000 square feet, much bigger than the typical New York apartment, to appeal to the larger families Hasidic Jews tend to have, according to Knakal, who brokered the Xinyuan purchase.
Xinyuan plans to redesign the project “somewhat,” and add amenities, Ozden said. The company will have its own local management team, he said.
“There will be many large multiroom units which are suitable for larger families, as well as those growing families who have been priced out of Manhattan,” Ozden said.
In the area that includes Williamsburg, the median price of condos that sold in the third quarter rose 9 percent from a year earlier to $703,000, brokerage Corcoran Group said yesterday in a report.