WSJ: China Cinda Buys into 65-story Chicago Office Tower
Largest Known Chinese Investment in Commercial Property in the Middle of the U.S
By ELIOT BROWN
March 13, 2014 2:56 p.m. ET
Chinese investors charged into the U.S. commercial real-estate market last year with high-profile deals in New York, Los Angeles and San Francisco.
Now they're buying in the middle of the country.
The 65-story tower at 311 South Wacker Drive in Chicago. CoStar
Cindat Capital Management, partnering with Chicago-based Zeller Realty Group, on Tuesday paid just over $300 million to purchase a 65-story office tower in Chicago, at 311 South Wacker Dr., according to Zeller Executive Vice President Ari Glass.
According to multiple real-estate executives familiar with the matter, Cindat is a subsidiary of China Cinda Asset Management Co. 1359.HK -3.43% , a Chinese company founded as a so-called "bad bank" for soured Chinese loans that has expanded toward becoming an asset management company. The company, which listed on Hong Kong's stock exchange in December with a $2.5 billion initial public offering, owns approximately 70% of the venture, while Zeller owns the remainder and is the managing partner.
Cinda didn't respond to an emailed request for comment.
The deal marks the largest known investment by a Chinese company in U.S. commercial property outside of the major cities on the East and West coasts, showing a growing comfort with the overall U.S. market by investors in the world's second largest economy.
After years of sitting on the sidelines, Chinese buyers in 2013 spent more than $4.3 billion on U.S. commercial property, more than the total tracked in the previous decade, according to data firm Real Capital Analytics Inc.
But most of those purchases were large, high-profile deals in New York and California, including billionaire developer Zhang Xin's purchase of a 20% stake in the General Motors building in Manhattan and state-owned Greenland Holding Group's deals to buy into two giant development sites in Los Angeles and Brooklyn.
As values have risen in New York and San Francisco, some foreign investors have begun to look elsewhere for more affordable properties, Chicago included.
"It's all about relative value," said Mr. Glass, whose firm controls more than 8 million square feet of space predominantly in the Midwest. "As those coastal markets have gotten way bid up, we've seen more interest from other parts of the world."
The tower at 311 S. Wacker, leased to numerous tenants including financial advisory firm Duff & Phelps and law firm Freeborn & Peters LLP, was sold by a venture of San Francisco-based Shorenstein Properties and Freemont Realty Capital LP, which bought the tower for $292 million in 2006. Shorenstein and Freemont last year tapped the Chicago office of brokerage Eastdil Secured LLC to market the building, according to Zeller, before finishing the deal Tuesday. Cindat was advised by Baltoro Capital Management.
The deal marks the first known U.S. property investment by Cinda, which has significant property holdings in China that it has accumulated through bad loans it purchased from Chinese banks. It also has a unit that develops and invests in property in China. Cinda ultimately hopes to become a diversified financial holding company.
—Dinny McMahon contributed to this article.
Write to Eliot Brown at email@example.com