Hat tip to Susie for sending in this article:
One year ago, Pacific Union CEO Mark McLaughlin attended a game-changing lecture about the future of Chinese investment in the U.S. The speaker was Elizabeth Harrington, the U.S. publisher at large of the Hurun Report, an authority on the wealthiest people in China thanks to its annual “Rich List.” According to McLaughlin, after hearing Harrington speak, it became clear that China’s wave of interest in purchasing U.S.—and particularly Bay Area—real estate was only in its infancy. “She was able to articulate that, if this is a baseball game, we’re in the first inning, not the ninth,” he says.
Pacific Union decided it wanted to play ball. The real estate firm sponsored the Hurun Report’s black-tie dinner in Beijing, honoring the 100 richest people in China in 2013. McLaughlin was seated at a table with a handful of billionaires. “Can you imagine Bill Gates attending an event celebrating his wealth? It’s a very different culture,” McLaughlin says.
The impressive contacts McLaughlin made just by attending the dinner made him realize that Pacific Union needed to set up a bilingual “Chinese Service Concierge Desk” in San Francisco as soon as possible, as well as a Mandarin/English website hosted on a Chinese server. He reports that viewing American listings in China is painfully slow, with each picture taking minutes to download. Given the “incredibly rapid” speed of Chinese business, this lag time simply could not stand. The Chinese-hosted website will be up on May 15 and the concierge (whose previous job involved doing similar work for USF) was hired about six weeks ago. “We’re engaging proactively on the ground in China instead of waiting for people to come here,” he says.
This proactivity is appreciated by Chinese buyers, he says, who are aggressive and quick to make a move if they think it’s a good investment. A few months after the Hurun dinner, McLaughlin was back in Beijing to attend an event about Chinese investment in the U.S. at the home of then-U.S. Ambassador to China Gary Locke. The guest list was 10 CEOs from American real-estate companies and 10 Chinese billionaire developers. Pacific Union was the only residential real-estate company there, thanks to contacts made during the Hurun event.
After McLaughlin presented a pitch on a large development opportunity in the Bay Area, he was approached by China’s third-largest developer. While the dinner was still in progress, the developer pulled McLaughlin aside to talk about making an offer. The next day, after a 14-hour flight, McLaughlin arrived back in San Francisco to discover his voicemail was full of messages. The developer had hopped on his Gulfstream after the dinner and beaten him back to SFO. “That’s how fast these guys are prepared to move,” says McLaughlin. The developer ended up putting in a $60-million offer on the development deal. (McLaughlin can’t give more details, since the deal is still in progress.)
If Chinese buyers move fast, they also hold for the long-term, something that does concern McLaughlin. While high-end U.S. buyers are likely to purchase a $5-million property and then sell it a few years later to buy a $10-million property, Chinese buyers tend to buy, hold and then buy more. McLaughlin says his firm recently had Chinese buyers purchase a $2-million-plus property in Seacliff because they just had a baby and were planning to move to America in six years for kindergarten. That lack of turnover, especially in places like San Francisco that have low inventory to begin with, could drive prices even higher, he says.
He also clarifies that even though San Francisco (along with LA and New York City) is one of the prime places for Chinese investments, when Chinese clients says they want a home in San Francisco, that could actually mean anywhere from Calistoga to San Jose. Some Chinese buyers are looking for brand new South of Market condos, where they can just come in and out with a suitcase and not worry about maintenance. Others want the Napa lifestyle; with a huge uptick in Chinese interest in California wine comes an increased interest in owning homes on a vineyard.
One wealthy buyer told McLaughlin he had a $20-million budget for a home in San Francisco. Luckily, before McLaughlin could send a cadre of agents to scour Pacific Heights trophy properties, the buyer clarified that he wanted to live near the founders of Facebook and Youtube, which would actually mean a home in Palo Alto. “There’s 1.3 billion people over there,” he says, “There’s a pretty big diversity of what they’ll want to look for.”