Between January 2013 and March 2014, Chinese direct acquisitions of commercial real estate (CRE) in the United States totaled US$5.8 billion – more than twice the cumulative amount invested in the previous eight years. China is now the second largest foreign investor after Canada, with an 8- percent share of the total cross-border investments in U.S. CRE.
In light of this, Reza Etedali co-chaired a sold-out YPO event, The Growing Wave of Chinese Investments in U.S. Real Estate, alongside Wei Chen on 29 April 2015 in Los Angeles. Etedali joined YPO in 2008 in California; Chen joined in 2009 in Tennessee. The event was a joint-effort by YPO’s Global Real Estate Industry Network and Doing Business With China Network.
As CEO of REZA Investment Group, Etedali is responsible for a multibilliondollar transaction track record as the premier retail real estate investment advisory firm. The group focuses resources on shopping centers and other retail investment opportunities with clients that run the gamut from major Chinese and American real estate investors and developers.
Etedali’s and Chen’s experience was the foundation of the architecture of April’s event. Discussions revolved around sharing best practices and insights for raising Chinese capital, understanding current and future trends and discussing the cultural challenges inherent in East meets West deal making.
Recognize Cultural Differences
“There are significant cultural differences between the United States and China,” says Etedali. “Understanding these differences and building a solid and personal relationship with Chinese investors is key to making a deal work.”
While cultural differences like communication and body language are frequently discussed, the more structural disparities that can affect a deal are often not.
“America has a lot of systems in place that do not exist in China,” says Etedali. “In America you negotiate in the beginning and proceed to close. In China, sometimes the negotiating continues all the way until close.”
Establish Personal Relationships
The system of trust within the U.S. business structure is very different from that of China’s.
“Typically when we open an escrow we don’t think about the person behind it,” Etedali explains. “In China, your business partner will ask, ‘Who is the individual you’re sending the money to? What’s their name? Do you have a relationship with them?’”
One of the biggest lessons learned over the course of the event was the importance of building a relationship prior to negotiating terms.