Hong Kong investors have been active buyers of U.S. commercial real estate in recent years. The COVID-19 pandemic and subsequent market slowdown, however, has resulted in a sharp drop in U.S. acquisitions.
According to Real Capital Analytics (RCA), Hong Kong investors were at least partial investors in 10 U.S. properties totaling slightly more than $1 billion during the 12-month period ending in September 2020. This accounted for 2.9% of all cross-border investment during this time, ranking Hong Kong No. 9 among all sources of foreign capital, RCA reported.
Hong Kong, however, had a 50% year-over-year drop in investment during this period. This was due in part to the COVID-19 health crisis but also from a general pullback in U.S. investments among all world players. Hong Kong ranked eighth in 2018 and fifth in 2019 for cross-border investments, RCA reported.
Located on the southeastern coast of China, Hong Kong is a semi-autonomous region within the People’s Republic of China that was, until 1997, a colony of Great Britain. Hong Kong has about 7.5 million residents and, relying on China’s policy of “one country, two systems,” is ranked as one of the freest economies in the world by The Heritage Foundation. More than 1,400 U.S. companies have regional offices in Hong Kong, according to the U.S. Department of State.
Tensions with mainland China have been rising, however. In 2019, the streets of Hong Kong saw mass demonstrations over Beijing’s perceived interference and heavy-handed policies. Analysts believe that the unrest could ultimately drive more investment from Hong Kong into safe U.S. assets once the pandemic passes.
Although investment has slowed down with the coronavirus-induced recession, there were some notable deals involving Hong Kong capital between fourth-quarter 2019 and third-quarter 2020. Three major deals involved the Nan Fung Group, a Hong Kong investment conglomerate.
The largest single deal involved the $438 million purchase of an office tower in the Queens, New York neighborhood of Long Island City in November 2019. Nan Fung Group teamed with a U.S. investor to buy the 830,000-square-foot building.
In January 2020, the investor’s affiliate, Nan Fung Life Sciences Real Estate, bought a 153,000-square-foot medical office research building in Boston for $115 million. The building is on the edge of the city’s Fort Point and Seaport districts.
In March 2020, Nan Fung Life Sciences also purchased a five-story, 115,000-square-foot office building next to Boston’s Winthrop Center for $75 million. The property was previously owned by MAPFRE Insurance.
In November 2019, an affiliate of Hong Kong’s Gaw Capital was among a group of investors in the Holiday Inn Express Honolulu-Waikiki, a 44-story, 593-room hotel in Hawaii, for $205.5 million. The property was purchased five years earlier by a California investment company and renovated for a price tag of $30 million. ●