China's Vanke is spending $116 million along with two other US real estate investors in a redevelopment deal in New York City.

China's real estate developer Vanke and its US partners will convert the building at 45 Rivington Street in Manhattan’s Lower East Side into a luxury condos. LONG YIFAN/ FOR CHINA DAILY

The US arm of Vanke, Vanke Holdings USA, will be converting an 118-year-old building on Manhattan's Lower East Side into luxury condos with Slate Property Group and Adam America Real Estate, according to The Wall Street Journal.

The building at 45 Rivington Street is owned by Allure Group, a nursing-care provider, and was formerly a school building.

Kai-yan Lee, managing director of Vanke Holdings USA, told China Daily that the deal fit three criteria that the company looks for when investing in projects — the macroeconomic conditions are good, the project is doable, and the project partners have long-term collaboration potential.

In addition, the Lower East Side neighborhood where the building is has plenty of opportunity for growth and is in a transitional phase, Lee said.

"You see a lot of younger people moving into the neighborhood, generally improving the living conditions of the neighborhoods with more amenities — like hip restaurants, artisan-type stores," he said.

Furthermore, the project is a renovation upgrade and not a ground-up development deal, so the project "makes sense," he said, and aligns "very well" with the company's goals in the US.

"When we decided to come to the US, we always envisioned ourselves as a local player. We make decisions like any other local companies here in the US make decisions," he said.

"At the group level, we came here with a long-term perspective — we want to continue to expand our exposure in the US. We see the potential of the US market as well as the value the US market provides for us as a diversification strategy," Lee said.

Vanke, China's largest residential developer, has been active in the US, with projects in San Francisco and several others in New York. It is developing a 61-story condo tower at 610 Lexington Avenue and has three other deals with Slate Property Group and Adam America Real Estate, according to the Journal.

The development deal comes at a time when Chinese developers are diversifying their portfolios abroad and, in particular, investing more in US real estate because of higher returns.

"We're looking at the trends these days for money that is coming into the US from China, typically into deals that are generating more returns than what they're able to do at home," said Edward Mermelstein, partner at Rheem Bell and Mermelstein LLP, which works with Chinese clients on real estate deals.

"This is very much a diversification play, similar to the situation we were seeing in the US in 2009 or 2010, where major US corporations were investing in China and Western Europe because they couldn't generate these types of returns internally," he said.

A spokesman with real estate firm CBRE said that the company is continuing to see interest from Chinese investors for American real estate projects.

"We're seeing investors and meeting with them. There's interest in New York to see what [deals] are out there," said Robert McGrath.

"That diversification, broadly, has been a theme and continues to be a theme from 2015 into 2016," he said.

In December, CBRE represented The Related Companies and TIAA-CREF in a $260.8 million sale of One MiMA Tower to Chinese developers SCG America, the US arm of Shanghai Construction Group, and Kuafu Properties, an investment company.