Chinese conglomerate Fosun International is looking to expand its real estate holdings abroad, even as foreign competitors bridle at the high prices Chinese buyers have been paying for commercial property, homes and other assets.
Fosun made a splash last year when it purchased New York's Chase Manhattan Plaza and London's Lloyds Chambers.
Now, backed by bank loans and funds from insurers, Fosun is on the hunt for real estate in cities such as Los Angeles, Paris, Hamburg, Frankfurt, Lisbon and Sydney, according to Xu Xiaoliang, president of Fosun Property, the company's real estate arm. The firm is finalising a deal in Los Angeles that could close by the end of the year, he said.
Mr Xu, in an interview in his Shanghai office overlooking the Huangpu River and downtown skyline, said Fosun is looking for office, hotel and residential assets and is interested in completed buildings and development projects.
The US, with its expanding economy and well-established regulatory framework, is an attractive market, Mr Xu said.
Fosun also is eyeing property services firms. In May, it bought Tokyo-based real estate management firm IDERA Capital Management for an undisclosed sum.
Since the group delisted its property unit from the Hong Kong Stock Exchange in 2011, Fosun has placed less emphasis on China's hotel and office sectors, given oversupply problems and intensified competition, and is focusing more on niche projects such as senior-living centers.
Fosun Property expects to more than triple its assets under management to 500 billion yuan ($93bn) by 2020 from 140 billion yuan. It also plans to boost the share of its overseas real estate to 50 per cent of its portfolio from 21 per cent.
While overseas expansion could boost Fosun's profits and act as a hedge against a downturn in China, it also carries risks, analysts said. "They've only just started buying property abroad in recent years," Kai Hu, senior credit officer in Moody's Corporate Finance Group, said, adding that there could be "refinancing risks if the cash flow from their real-estate operations can't cover their loan repayment at its maturity."
Fosun is one of many Chinese individual and institutional investors buying more real estate abroad to diversify operations in the face of a domestic downturn.
But this has created tension in some countries, including Australia, Singapore and Canada, amid complaints that rivals are getting priced out of the market by flush Chinese buyers.
This month, a Chinese insurer agreed to buy the Waldorf Astoria hotel in New York City from Hilton Worldwide Holdings for $US1.95bn ($2.25bn), the highest price ever for a US hotel, brokers said, although it isn't the highest on a per-room basis.
In Australia, foreign investors bought about one of every six new or yet-to-be-built houses or apartments sold in the third quarter, according to a National Australia Bank survey. That has helped fuel price increases of about 10 per cent in Australian homes nationwide over the past year and nearly 15 per cent in Sydney.
Lawmakers there have come under pressure to respond. Philip Lowe, deputy governor of the Reserve Bank of Australia, reminded banks in a recent speech to be prudent in mortgage lending and be mindful of risks as home prices soar.
"At least some parts of the housing market have become unbalanced and this has generated some increase in overall risk," Mr Lowe said.
Mr Xu of Fosun said higher prices are a normal result of cities becoming more international, as seen in Australia. "This to a certain extent has to do with investment demand," he said.
Many of China's recent overseas investments seem less driven by profit than a desire to learn the ropes in overseas markets, property consultant Cushman & Wakefield said in a recent report.
Chinese institutional investment in overseas property totaled $US5.1bn in the first half of this year, up from just $US75.2 million in 2008, according to data providers Real Capital Analytics and Cushman & Wakefield.
Property consultants said the Chinese march abroad in some ways resembles Japan's 1980s buying spree of foreign offices, hotels and golf courses. "But this wave of interest from the Chinese is more sustainable, " Anthony Couse, managing director, East Asia at JLL, formerly known as Jones Lang LaSalle, said. "We see a difference in the motivation."
While Japanese investors leveraged inflated property values at home to acquire offshore assets, Chinese buyers are intent on diversifying risks and globalising operations, Mr Couse said.
Chinese property developers also are drawing on their customer base by focusing on foreign cities where Chinese customers want to buy homes.
"We have to link our expansion plans with migration and employment trends," Fosun's Mr Xu said, adding that the US is a popular destination.