By Roland Li
Joseph Moinian’s W Downtown Hotel & Residences occupies a parcel in Lower Manhattan that overlooks the World Trade Center, a visible reminder of the changes in the area. Less apparent are the advantages of the building’s south view, which faces the converging Hudson and East Rivers.
When Moinian was planning the condo and hotel building, designed by Gwathmey Siegel & Associates and the interior firm Graft, he brought a feng shui consultant to ensure that rooms conformed to Chinese beliefs of space and aesthetics. Luckily, water to the south and the city to the north aligned with the beliefs, and layouts were also made with particular arrangements in mind.
From the onset, foreign buyers were a target for Moinian. “We made sure, from day one, we were very concerned with different markets,” he said.
Soon, the developer will make another move to attract Chinese business. In November, Moinian will partner with Windham Realty Group and travel to China to meet with prospective buyers, eventually visiting seven cities.
“I think that Chinese see that U.S. real estate has hit the bottom,” said Moinian. “This is the time to get involved.”
Aside from its layouts, the W Downtown is a globally recognized hotel brand, an asset for Chinese buyers who are unfamiliar with local developers and neighborhoods.
“A brand name like W brings a lot of weight, as well as a built-in fan base,” said Jason Gohari, Moinian’s director of sales at the building.
The development has 217 hotel rooms on the lower floors, and 159 condos start on the upper floors. A restaurant, BLT Bar & Grill, occupies the ground floor. Starwood Hotels, the parent of the W brand, will manage both areas. Coincidentally, the hotel chain’s executives recently spent five weeks in China to gain a better perspective of the growing hospitality market.
Although some Chinese have already bought in the building, a few months ago, Moinian was searching for a partner when he connected with Windham, a real estate consulting company with an office in Shanghai. Unlike other local companies, Windham is wholly owned by Michigan-based Windham Development, giving it presence in both the U.S. and China.
Founded in 1967, Windham began as a developer and broker in Michigan and built its presence in the Midwest. Windham began exploring a Chinese operation in late 2006, committing a seven-figure investment the next year. In 2008, it obtained a consulting license and began working with local buyers, making it the first U.S.-owned real estate consultant that focused exclusively on American properties for Chinese buyers.
Windham partners with Chinese companies to reach out to high net worth individuals active in a variety of industries, from import-export to financial to real estate. The company then gathers market reports from local sources and translates them into Chinese and pitches a variety of properties. Other New York projects include the Setai in midtown and the Trump Soho – Chinese buyers gravitate towards new construction. If potential buyers show interest, they are flown to the U.S. and tour major cities along both coasts. Justin Stewart, the company’s director of U.S. operations, works from New York.
“We help to bridge the culture gap,” said Steven Lawson, CEO of Windham Realty, who works in Shanghai in an office with primarily Chinese natives.
For now, Windham is the only U.S. company with a bricks and mortar presence in the country. Infrastructure and time costs have discouraged other companies from moving into the market. The real estate cost in China is also relatively expensive, which can come as a surprise to some foreigners. “I feel that’s a deterrent,” said Lawson.
Culturally, many Chinese close in all-cash deals, but the Windham has worked with lenders, including HSBC bank, to give them mortgages. Interest rates are generally comparable to the low rates available to Americans, but the down payment may be slightly higher, said Lawson.
Around 40% of clients are “connected” to the U.S. – meaning they wish to live in their homes or give them to their children or eventually immigrate. The remaining clients are looking for an investment that will appreciate.
Another appeal of investing in American is a federal program called EB-5, which allows foreigners who invest at least $500,000 to gain a green card and possible foreign residence. Forest City Ratner used the program to raise $249 in Chinese loans for the Atlantic Yards project in Brooklyn.
Currently, Windham does around six deals in a typical month, ranging from $5 million to $10 million. It is seeking to expand from 15 to 25 staff in China and to open an office in Beijing. It is also adding Boston to the tour itinerary, because Chinese buyers often look at nearby colleges for their children. Windham is also looking for a West Coast representative.
In August, the Durst Organization invested in a Taiwanese project, to be developed by Vantone Real Estate Co., one of the future tenants at 1 World Trade Center. Vantone is also investing in Dursts’ 855 Sixth Avenue in Herald Square. The Moinian Group is also exploring ground-up, mixed-use development in China. But Lawson said that more American developers breaking into China is still challenging, because many local Chinese companies don’t see an upside to partnerships. On the other hand, a favorable exchange rate between the dollar and renmingbi, the Chinese currency, continues to make America’s prominent cities an attractive buy for the Chinese.
