Wave of Chinese investment coming to Western Washington?

  • By Oliver Lazenby The Bellingham Business Journal
  • Monday, November 23, 2015 5:23pm
  • BusinessReal estate

BELLINGHAM — In his office on Newmarket Street in the Barkley District, Patrick Starr entered search terms into an online real estate database and came up with a list of properties for sale for more than $4 million in King County.

An untrained eye might not have noticed the prevalence of the number eight in the listings. Properties appeared on the screen for $4,088,000, $6,088,000, $10,888,000, $5,488,880.

But to Starr, a Whatcom County commercial real estate broker with John L. Scott, the eights mean something. The number is lucky in China; the properties are being marketed toward Chinese investors looking for a safe investment, Starr said.

He knows because, as perhaps the only Chinese-speaking commercial real estate broker in the county, he also markets properties to Chinese investors.

In a two-year period ending in July 2013, Starr represented Chinese investors who bought more than $25 million in high-priced commercial real estate, including the Birch Bay Waterslides, Horizon at Semiahmoo, and Sea Links Golf Course and CJ’s Beach House in Birch Bay.

At that time, the majority of sales in north Whatcom County went to foreign investors, said Mike Kent, a real estate consultant in Blaine. Kent represented the sellers in many major sales.

Since then, Whatcom County hasn’t seen any high profile transactions, he said.

“Recently it hasn’t been that prevalent. Three years ago it was,” Kent said. “It’s not that it’s not happening, we just haven’t had any transactions of late.”

But changes in the Chinese economy could bring another wave of real estate investment to Whatcom County, Starr said. It’s already happening in Seattle, and in the last six months Starr has been busy making offers on behalf of Chinese investors. One recent offer he made for a Chinese client was on a residential property. The price: $800,000. “Gotta love that eight,” Starr said.

“I’m going crazy right now,” he said. “I’ve written so many offers in the last couple days.”

Chinese economy

The purchases Chinese investors made from 2011 to 2013 were deals, Starr said, because the market for large commercial properties in Whatcom County was at a low point. Many of those high-profile deals were distressed sales. Also, Chinese investors based in B.C. benefited from a stronger Canadian dollar.

Since then, the deals have slowed to a crawl as the local real estate market improved and the Canadian dollar lost value to the U.S. dollar.

But when China’s economy slowed earlier this year, Chinese investors began stashing their money outside China. According to a September report in Bloomberg Businessweek, data the news agency compiled showed that an estimated $141.66 billion left China in August 2015, up from $124.62 billion in July.

Much of it went to the U.S.

“The U.S. dollar has always been seen as a safe haven around the world,” said James McCafferty, assistant director for Western Washington University’s Center for Economic and Business Research. “If I were to have substantial holdings in China and saw the economic indicators I would probably look for places where I could put it out of the decline.”

The money leaving China is going all over the world. Simon Henry, the CEO of Chinese real estate website Juwai, told CNBC in September that the U.S. is the top market for his clients who want to invest overseas. New York and California get the most Chinese investment, followed by Washington, Florida, Michigan and Texas, he said.

Whatcom County’s proximity makes it popular with Starr’s clients in Vancouver, B.C., a Chinese enclave. They can drive down, check on their properties and drive back home, he said.

But the amount of money Chinese investors spend in Whatcom County is nothing compared to what’s happening in Los Angeles, San Francisco, New York, or Seattle.

“I don’t want to overstate it,” Starr said. “But per capita it’s an incredible amount of money.”

Chinese investors tend to be patient, said Kent, the Blaine real estate agent, said.

“While we may take a development parcel and plan on bringing development on within a matter of years Chinese investors are very methodical and often plan in decades or generations,” he said.

How or whether Chinese investment will affect the rest of the county’s economy depends on what investors buy and what sellers do with the cash. Whether Chinese market conditions will continue to make foreign investment worthwhile is also uncertain.

But Starr, who has in part built his career on Chinese investment in Whatcom County, thinks the surge in interest he’s seen recently is just the beginning.

“I’ve been playing in this market for seven or eight years and at first I thought maybe it’s going to run its course,” Starr said. “But now I think it’s just getting going.”

Finding a niche

Starr learned to speak Mandarin at Washington State University in the early 1990s. After graduating, he continued studying Chinese in Taiwan, where he found work as a manufacturing consultant. He helped U.S. companies find Asian factories to manufacture their products.

When he returned to the Northwest he continued doing the same work, which meant he had to travel more than he wanted.

“I thought about what I could do with the Chinese language here locally,” he said. “I started helping people look at real estate and realized there were a lot of Chinese people up here looking to buy real estate.”

Starr got a Certified Commercial Investment Member certification and started advertising properties in both English and Mandarin in 2007.

His style is casual — he doesn’t wear a three-piece suit to interact with buyers in big deals. Instead, he may wear a jacket over his lucky Hard Rock Cafe T-shirt. He prefers to build trust by calculating return on investment for his clients on a notepad with a Sharpie, rather than by driving an expensive car, he said.

In the eight years since he got into real estate he has represented Chinese investors in a couple of dozen commercial real estate sales, ranging from $200,000 condos to an $8 million (another eight) office building in Seattle last month. All but about five of those transactions were in Whatcom County, he said.

When Starr first started marketing Whatcom County properties to Chinese investors, he thought he would be able to interest Chinese buyers living in or near Vancouver, B.C. But now, he’s getting interest in buyers who are actually in China, he said. Those buyers aren’t affected by the Canadian dollar’s decline.

The new Chinese interest comes with new hazards.

“What you run into a lot is a guy who claims to have all the money in the world, but wants a 120-day feasibility study period — a time window where the property is off the market,” Starr said. “That window can give him time to try to market the property in China and find a buyer in China for that property.”

Starr recently listed a commercial property for $9.6 million, then later found his listing converted entirely to Mandarin in an advertisement on a Chinese website with a new price — $20 million, he said. If the fraudulent buyer doesn’t flip the property during the feasibility study they won’t close the deal, costing Starr time.

He’s also run into xenophobia. Some people have an attitude that “the Chinese are taking us over,” Starr said. He takes a different view. Many of the projects bought by Chinese investors weren’t going to find a market in Whatcom County, he said.

“A lot of these were failed subdivisions where no one was working and permits were going to expire,” he said. “Here’s someone who is going to put the workers back to work.”

When Starr started marketing Whatcom County properties to Chinese speaking investors, he didn’t think he would ever have so much interest as he does now, he said. The recent interest from buyers who are actually in China surprised him.

“I always thought it would just be Chinese people via Vancouver,” Starr said. “I’d be lying if I said I thought the Chinese flight was going to be so huge.”

Oliver Lazenby, associate editor of The Bellingham Business Journal, can be reached at 360-647-8805, Ext. 5052, or olazenby@bbjtoday.com.

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