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Chinese Investors Do About-Face, Start Selling U.S. Commercial Properties

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Chinese investors pulled back from U.S. commercial real estate in a big way in the second quarter, buying only $126.2M worth of properties. At the same time, they sold a total of nearly $1.3B worth of U.S. commercial real estate, according to Real Capital Analytics data.

Chinese currency, foreign investment, foreign money

That is the first time since before the 2008 recession that Chinese investors have been net sellers of U.S. commercial real estate. The slowdown in Chinese investment and selling spree was spurred by the Chinese government's crackdown on overseas acquisitions, the Wall Street Journal reports, as the government looks to stabilize the yuan.

“I'm shocked. They really curtailed their buying and stepped up sales,” Real Capital Analytics Senior Vice President Jim Costello told the WSJ.

The drop follows a surge in investment that began a few years ago when the Chinese government loosened restrictions on companies buying overseas assets. Investors tended toward trophy properties in gateway markets, such as the record-breaking $1.9B that Anbang paid for the Waldorf Astoria hotel in New York in 2015 (as of yet, the hotel hasn't been re-sold).

The change has been sudden. As recently as Q1, Chinese investors bought about $4.2B of U.S. real estate assets, while selling only $450M. The Q1 numbers, however, represented a brief spike as well, since during the last half of 2017, Chinese investors barely bought or sold any U.S. real estate.

Some of the recent sellers include HNA Group and Greenland Holding Group. Just last month, HNA Property Holdings sold City Center in Downtown Minneapolis to a non-Chinese overseas buyer new to the Twin Cities market for $320M, compared to the $315M it paid in late 2016.