In the film Sex and The City, Carrie Bradshaw tells Miranda Hobbes: “New York Magazine says Brooklyn is the new Manhattan.”
“Yes, but whoever wrote that lives in Brooklyn,” Hobbes deadpans in the 2008 flick.
As it turns out, New York Magazine may not have been too far off the mark. Already, Brooklyn is catching up to Manhattan when it comes to home prices. In Manhattan, the average home price is $1,303,421. Its more affordable counterpart Brooklyn is not so affordable anymore, reaching an average price of $959,907, says the Daily News.
So perhaps it should come as no surprise that a Chinese developer now wants to capitalise on the Brooklyn Gold Rush. Xinyuan Real Estate announced last November that it has taken over a two-acre site in the trendy Williamsburg section of Brooklyn to build a 216-unit upmarket condominium block – with units that could sell for as much as $3 million each. When complete, Xinyuan will be the first listed Chinese company to build a significant residential development in the US.
To justify the premium the company has hired architects WASA/Studio A – a New York firm known for its sleek and sustainable designs. “We are not looking to build a Chinatown,” John Liang, head of Xinyuan’s US business, told the Financial Times. However, he did add that some units will feature a Chinese-style wok kitchen. “The Xinyuan name will not be prominently associated with the development. We are going for a Western name, a Western look.”
Still, Xinyuan expects to sell at least 40% of the condo to Chinese investors. The developer told CBN that it plans to promote the New York project – scheduled to be completed at the end of 2014 – in first-tier Chinese cities, including Beijing, Shanghai, Guangzhou and Shenzhen as early as this summer.
But let’s backtrack a little. What does Xinyuan do? If you haven’t heard of the Chinese developer, you probably know its investors. Equity International – which was co-founded by famous property tycoon Sam Zell – and hedge fund manager John Griffin both bought large stakes in the company when it went public on the New York Stock Exchange in 2007. It was the first Chinese developer to list in New York.
While the Brooklyn project is its first start-to-finish housing development in the US, the Chinese developer apparently has been active on the US residential market with other deals. Previously it acquired 15 finished luxury condo units in Irvine, California, for $10 million. Last year, Xinyuan also closed on a $7.4 million foreclosure of 325 finished lots and 185 acres of undeveloped land at various sites near Reno, in northern Nevada.
Back in China, Xinyuan, which carried a market value of $324 million as of this week, largely focuses on second-tier cities in the country. The company has built some 31 million square feet of housing in Chengdu, Hefei, Jinan, Kunshan, Suzhou, Xuzhou and Zhengzhou. Last year the developer reported revenue of $915 million, an increase of 32.9% from a year earlier. Net profits also went up 53.3% to $158 million.
Industry observers, however, question the Chinese developer’s expertise in the US market. New York City can be particularly challenging for foreign firms unfamiliar with how contractors and unions operate. Xinyuan, however, is not worried, saying that it has hired locals in New York to help navigate areas like that.
But Liu Aiming, former vice president of developer Vanke, remains unconvinced. “Property development requires local knowledge. Even in China, the northern part of the country is very different from the south. The difference between China and other foreign markets is even greater. Developing property overseas seems like a publicity stunt to me,” Liu told China Business News.
Others are also sceptical too. “Xinyuan does not have any competitive advantage over other developers,” Dan Fasulo, managing director at Real Capital Analytics, told the China Daily. “It is complex to build a building anywhere, and it’s more complex to have your headquarters 10,000 miles away.”
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