Warning for China’s overseas property investors

Chinese investments in overseas properties are still active but are having to overcome new capital challenges, according to legal experts involved in two recent deals.

Recently SRE Group, a Chinese integrated real estate developer, acquired 75 Howard, a luxury residential tower at 75 Howard St in San Francisco. In the UK, Chinese Estates Holding, a Hong Kong-listed property developer, acquired 11-12 St James’ Square in London for £174.9 million (US$227.8 million).

When Chinese investors plan to invest in American and British real estate at the moment, the impacts of China’s restriction on capital outflows cannot be overlooked, said legal experts.

“We will continue to see significant outbound investment into the US in the medium to long term, but this may slow in the short term as deal fluidity is affected by China’s restrictions on capital outflows,” Paul Guan, a real estate partner in the Hong Kong office of Paul Hastings, told Asia Business Law Journal.

David Hamsher, a partner in the global real estate practice of Paul Hastings in San Francisco, added: “The somewhat opaque approval process adds potential uncertainty to the Chinese investor’s ability to expatriate the capital necessary to close, and may lead some sellers to look to alternative buyers who may have a greater ability to secure such funds.”