Waldorf Astoria sale to spur more purchases by Chinese

Updated: 2014-10-10 07:22

By JACK FREIFELDER in New York(China Daily USA)

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Waldorf Astoria sale to spur more purchases by Chinese

 The Waldorf Astoria is pictured at 301 Park Avenue in New York on Oct 6. Hilton Worldwide Holdings Inc said it would sell its flagship Waldorf Astoria New York hotel to a Chinese insurance company for $1.95 billion. Brendan McDermid / REUTERS

The sale of the Waldorf Astoria hotel in New York to China's Anbang Insurance Group Co will touch off other high-profile purchases in the city by Chinese investors, according to local real estate executives.

"The Waldorf Astoria is obviously a very high profile, iconic property, so that's going to get a lot of press," Steven James, president of Manhattan brokerage for real estate firm Douglas Elliman, said Wednesday in an interview with China Daily. "General wisdom says that this real estate market is going to continue to rise. For a foreign buyer, if they're going to invest in a city they look to see if it's a safe haven for money. Clearly, New York is that spot and [investors] see the value there."

"Moving forward, I don't think you are going to see that many hotel sales," James said. "Again, there's only so much inventory out in the marketplace … because a lot of hotels have been sold and converted the space into condominium use. I'll see other other sales with hotels, but more often than not it'll be office buildings."

Bob Knakal, chairman of Massey Knakal Realty Services, said his group has sold properties to foreign investors from 49 countries during the last three years. He also said his firm sees "a very tangible trend" from Chinese investors, one that is "changing the nature of foreign investment in New York".

"We've done 15 or 16 transactions with Chinese nationals over the past two to three years," Knakal told China Daily. "But in terms of the number of investors, we've sold more properties to investors from China than from anywhere else."

"Each of those has been a commercial property, whether it's an office building, retail hotel, piece of land, development site, etc," he said. "Every project type has its own pros and cons, and the hospitality sector is [one] that is most sensitive to fluctuations in the economy - more inherent risk, but it also has more upside."

Anbang said on Monday that it is paying $1.95 billion to Hilton Worldwide Holdings Inc for the Waldorf, the largest amount ever for a US hotel, according to research firm Lodging Econometrics.

The Waldorf, which straddles Lexington and Park avenues, opened in 1931 as the tallest and largest hotel in the world, according to its website. Hilton did not purchase the property until 1972.

When that Waldorf purchase closes, it will be the biggest real estate acquisition by a Chinese investor in the United States to date. Combined with other purchases in the New York area by Chinese investors, it will bring the total spent in 2014 to $2.7 billion, according to Real Capital Analytics Inc, a research firm that tracks commercial real estate sales.

Lin Pan, an owner and broker at Great Neck, New York-based Lin Pan Realty Group, said in China the real estate market is down and rich Chinese people want diversity and America is the No 1 choice. "This trend of investing in the commercial market is just the start, and this purchase is not going to be the last one."

Yuval Greenblatt, an executive vice-president with Douglas Elliman, wrote in an email to China Daily: "In the case of the Waldorf, you own an asset that encompasses an entire NYC block in prime midtown … and [it's] operated by an experience hotelier. Hotels such as the Waldorf provide immediate cash flow, so [they are] arguably less risky than large sites needing development.

"The new owners can work on increasing revenue and unlocking value by improving or repositioning the property, and the belief is that these properties will hold value."

James, with Douglas Elliman, said at the end of the day the Waldorf sale "bodes well for Manhattan real estate values".

"The real result here is that whether it's an office building, or an iconic hotel like the Waldorf Astoria, there is real value to buying real estate in New York," James said. "It's a good place and a safe place to put your money."