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CRE-Finance LLC Shows How Hotel Assets and Chinese Investors and EB-5 Unite

Investment from Chinese businesses and people in U.S. hospitality properties are expanding and are literally breaking new ground

Beyond investments in existing U.S. hotels, Chinese investors have increasingly delved into the development of new hotels in the U.S. Real estate developers from China, historically tuned toward residential properties, have begun to branch out into hotel and mixed-use projects, as evidenced by recent developments in the greater Los Angeles market.

In the summer of 2013, Greenland Group of Shanghai purchased the 6.3-acre "Metropolis" site, just north of Staples Center in Downtown LA, for $150 million. Greenland Group's planned mixed-use development project on the site will include a 350-room Hotel Indigo, InterContinental Hotels Group trademark "branded boutique."

In late 2013, Oceanwide Real Estate Group bought a 4.6-acre site just east of Staples Center, where it plans to build a five-star hotel, apartments, and retail stores.

In addition to these prospective developments in Los Angeles, Chinese property conglomerate Dalian Wanda Group aims to expand its luxury real estate and hotel business with a luxury hotel in the U.S., a move to cater to the booming outbound, upscale travel market from China.

Greenland, Oceanwide, and Dalian Wanda are leading real estate companies in China, having developed and operated major residential and commercial real estate projects in their home country. These new ventures represent the companies' first major hotel developments in the U.S., a sign of increasing confidence from China in the long-term prospects for the U.S. hospitality industry.
Chinese investors have been searching for hotels to purchase in gateway cities like Los Angeles, San Francisco, and Seattle in the west, as well as New York City in the east.

Most EB-5 Visa Applicants—and Their Investment Dollars—Come from China

Todd Tretsky of CRE-Finance LLC explains that during and after the recent recession, when traditional sources of hotel financing became very scarce, the U.S. government's EB-5 visa program channeled business-minded immigrants—with many viable hotel investors among them. Moreover, the vast majority of EB-5 applicants came from the Chinese mainland.

Even following the economic downturn, with wider options for financing hotel construction, the EB-5 program is proving very attractive for foreign investors. This can be seen in the increasing number of visas: There were 7,641 EB-5 visas issued in 2012, and that number rose to 8,567 in 2013. Most of these (approximately 80%) continue to come from mainland China, with individuals attracted by the opportunity to set down professional and personal roots in the U.S.

Capital continues to flow from China to the U.S. hotel industry. China's hotel and real estate markets have experienced a general slowdown since early this year, and investors from mainland China have targeted overseas investment. Chinese investors, ranging from individuals targeting purchases of economy hotels to major firms investing in full-service luxury properties, have become especially active in the U.S. hotel transactions and ownership market. Most recently, some highly prominent real estate companies in China have invested hundreds of millions in major mixed-use developments that include hotels. Investment from Chinese businesses and people in U.S. hospitality properties is not only expanding but also literally breaking new ground.

If you have any questions regarding commercial real estate or are seeking mortgage financing, then please contact Rich Tretsky or Todd Tretsky at CRE-Finance LLC. Our number is 855-515-5585 or visit our website at www.cre-finance.com.