David Fong
David Fong is the managing director of the Asia Pacific Capital Company, and has over 16 years of experience in the real estate industry. As one of the top finance and acquisition attorneys in the U.S., Mr. Fong has helped his clients acquire, finance and sell over $7 billion in real estate assets and debt instruments involving nearly every real estate asset class. Mr. Fong has numerous connections with funding management personnel in China, and is familiar with China’s real estate trends. He is a frequent consultant on Chinese business matters for U.S. companies.
Where are the real estate investment opportunities in China?
Mr. Fong begins by saying that it depends, due to the size and broadness of both markets. He then lists off opportunities on commercial/retail sectors due to, “the dampening down of residential development,” and senior/affordable housing, giving the statistic that, “by 2050, the amount of people over 60, Chinese people, will be larger than the entire US population.” He goes on to talk about an anecdotal reference where an acquaintance of his created a pipeline of several Silicone Valley like business parks, which attracted small to medium businesses, created jobs, and were not subject to government limitations in real estate. Finally, Mr. Fong talks about 2nd and 3rd tier cities, saying that “I think the urbanization in China will continue, that’s going to fuel, still, a lot of demand.” His thoughts are similar to that of Mr. Mugel, as he notes how “the Chinese still needs some more expertise on the American side,” explaining that “we have companies in the U.S. that spent lifetimes just focusing on one area [of real estate] ... so that level of expertise I think is something valuable I think that can help the Chinese.”
What are companies like CDH, Carlyle and Angelo Gordon doing in China?
“Well companies like Carlyle and Angelo Gordon,” Mr. Fong begins, “those are fund managers. Those companies have funds and they’re active in investing in Asia.” He adds how his conversations with Angelo Gordon’s team members indicated that they, “invested in about 15 different projects already in China” and how the company has “north of 600 million dollars US just to invest in Asia.” Mr. Fong goes on to explain that these companies “partner with local developers who have projects, they provide the capital, and they rely on the developers to provide the expertise, and then invest in the project together. They will get a preferred return, and they split up the money in a structure that’s negotiated.”
What kind of moves are Chinese banks making in the U.S.?
Mr. Fong indicated how Chinese banks were very conservative, saying how “they participate in syndicates of loans that are originated by major American lenders” and that they “gravitate towards more really conservative loans. 60-65% loan to value, and nothing more.” He shows how it can be a problem, where “the US borrower will still prefer the non-Chinese borrower because again from a borrowers perspective they want certainty of close.” And the recent increase in competition for lending in their loan to value range exacerbates the problem. Solutions to the problem Mr. Fong listed included the CUSV as a measure of comfort and confidence to borrowers, and an increase in leverage for Chinese banks through partnering with a Blue Chip company. He describes it as “a credit enhancement, though it does put a little more stress on the cash flow asset.”
