Chinese commercial real estate investors, who have poured money into trophy projects in New York and San Francisco, are establishing a new beachhead in Atlanta.
Leading the charge is Dezhu U.S., the Atlanta-based subsidiary of Chinese developer Dezhu. Since 2013, it’s been quietly investing in new residential, mixed-use and hotel projects from intown neighborhoods to areas well outside the city.
In Atlanta’s Old Fourth Ward neighborhood, it has permits for residential projects including a mid-rise condo development at 525 Parkway Drive, said Chief Financial Officer Ming Liu.
Other projects include apartments and townhomes, which are also a block or two west of Ponce City Market and the Beltline’s Eastside Trail.
Near Mercedes-Benz Stadium, its mixed-use development anchored by the Hard Rock Hotel, known as Castleberry Park, could see vertical construction start later this year, Liu said.
In Midtown, Dezhu bought out the position of an apartment developer at Juniper and 5th streets, where it will build new $500,000 to $600,000 condos, Atlanta Business Chronicle reported March 19.
In the suburbs, it’s focused on residential development.
In Cumming, it has a senior housing project near Georgia 400. In Milton, it has a luxury single-family housing complex.
West of downtown, it’s working on townhomes and residential duplexes and has been selling properties for new development, according to Atlanta real estate firm Databank Inc.
Dezhu plans to invest $200 million in new Atlanta projects this year, and then increase its investment to $350 million next year, Liu told Atlanta Business Chronicle. One project it’s looking at is near Emory University Hospital Midtown. For now, it’s only focused on expanding its portfolio in Atlanta, though it eventually wants to expand to cities in North Carolina, Florida and Texas.
“Generally the Atlanta real estate market is booming,” Liu said. “Fortune 500 companies are relocating to Atlanta, with several that will bring more requirements for condos and apartments, from my point of view.”
Dezhu may be just the start of Chinese money flowing into metro Atlanta real estate. Liu said, “Chinese investors look at Atlanta as a new real estate market.”
Dezhu’s expansion comes as Chinese conglomerate HNA and insurance giant Anbang pull back on U.S. real estate investments, after quite a spending spree. That caught the attention of Beijing, which is now trying to curtail the flow of capital out of China, Reuters and other U.S. media outlets such as Bloomberg have reported.
China was the third-largest international investor in U.S. commercial real estate in 2017, trailing only Canada and Singapore in spending on U.S. commercial real estate, according to a December 2017 study by Michael Wolfson, associate director of capital markets research with Newmark Knight Frank in New York.
Chinese investment into the United States was $8.2 billion last year, Wolfson said in an email to Atlanta Business Chronicle. Most of it went into trophy properties in the big gateway cities.
Now, with Beijing closely watching, the largest investment groups are shedding properties.
“The larger insurance companies are the ones facing the most scrutiny,” said Wolfson. “They’re not all going to entirely pull out of U.S. commercial real estate, but the government is certainly forcing their hand right now.”
Dezhu is also a bit of an outlier compared to other Chinese investors. For one, it’s never been attracted to the gateway cities such as New York, Washington D.C., Seattle and San Francisco. Liu called real estate in those cities too hot and very risky.
It’s also got both an investment and development platform. That, and its lack of interest in the gateway markets, makes it a bit unusual.
“We are a design and build developer,” Liu said, and “Atlanta is kind of a niche market.”
He said Dezhu’s model could provide more opportunities for Chinese companies to invest in U.S. real estate, with Atlanta serving as the initial focus.
“Atlanta has a large workforce moving in,” he said. “I see lots of opportunities.”
Dezhu wants to create deep roots in Atlanta and has the resources to do so, said Alex Horn, with the lender BridgeInvest, which provided Dezhu with a $6 million loan to buy the Midtown condo site.
While it’s not unusual to see Chinese investment in Atlanta real estate, most of it has been under-the-radar and focused on apartments, said Christa Huffstickler, president and CEO of Engel & Völkers Atlanta .
Dezhu getting bullish on condos is important, she said. Few developers have found success launching condos in the $500,000 price range because it’s been difficult to secure construction financing.
Dezhu could change that.
“My hope is that their activities will catalyze additional for-sale development,” Huffstickler said.