Finding the right commercial real estate partner for foreign investors

The China Investor, Volume 1, Issue 1

Article By Skip Whitney

Finding the right commercial real estate partner for foreign investors

How foreign investors can benefit from teaming up with a partner who knows the local lay of the land.

By Skip Whitney

Since worldwide real estate is a local business, not only does the culture of the country but the location and its people play an important role when finding the right commercial real estate partner. Business and Investment in real estate can not be conducted in San Francisco, New York or Los Angeles the same way it is done in Beijing or Shanghai.

Unlike China, where the local government has the final say in development and investment, real estate in the U.S. is complex with many challenges.  It is not unheard of for projects to take up to ten years to get approved and even after approvals lawsuits can be brought forward and cause further delays.

To make the process smoother, the investor could hire a contractor to build the project. In some instances, the Chinese investor has tried to build the project on their own without understanding the perils of the local market with labor unions and subcontractors only to find they are unable to complete the project on time or within the budget.

Also, if a Chinese investor has not followed through in their commitments to purchase a property, it could cause a reluctance by the U.S. real estate executives to do business with the investor. Therefore, even if a Chinese investor bids on the property at a higher price than a local investor, the Chinese investor might not get the deal since the seller has more familiarity with the local buyer and wants certainty to close the sale.


Based on these experiences, many Chinese investors have learned ways to advance on the American market. One way is to set up a satellite office from the Chinese headquarters or to find a trusted partner in the U.S. Given the local nature of real estate, it is recommended to identify a local partner who has an established business platform and a proven track record in the geographic area. The partner can be in any sector such as residential, senior housing , commercial or retail.

As an example, if the interest is in residential development an investor can choose a developer who has the knowledge and expertise in the geographic area where he wants to invest. American real estate developers traditionally seek outside joint venture equity partners for their developments, which is not typical in China.

A foreign investor could benefit from a partner who knows the local lay of the land and how to find good real estate development opportunities. These partnerships also allow for off-market transactions that a non local investor would not be able to participate in.

Once a partner and project is found, a relationship can be established to develop a joint venture for the development of the property. Traditionally a joint venture structure would be put in place where the role of the local partner would be to handle the day-to-day operations, dealing with local authorities, hiring the general contractor to build the project and helping to arrange the financing for construction. 

In this example, a joint venture would be set up where the local partner invests a set amount in the partnership as a general partner and the Chinese investor contributes a set amount as a limited partner. The key to set up the venture is to find a trusted partner to align with.  It’s also important to find someone who has experience in doing transactions successfully with Chinese investors. Once a partner is found, it’s vital to build a relationship and have upfront communication to build a balanced partnership.

Tagged In

About the Author
Skip Whitney
Skip Whitney

<p>Skip Whitney is the founder of Kidder Mathews China Services Group based in San Francisco. The China-focused cross-Pacific real estate group works closely with Chinese and U.S. companies seeking investment opportunities and capital partners. It’s advisory services including site location, brokerage, development, joint ventures, and property management.</p> <p>An early leader in China and U.S. cross-border transactions, Whitney is one of the top real estate executives for Chinese investment on the West Coast. He also advises clients from other regions of Southeast Asia on inward bound investments. </p> <p>Whitney, who started his real estate career in 1972, has been involved in all facets of real estate, including residential, commercial leasing, bio tech, investment sales, development, and capital markets. He has handled hundreds of lease and sale transactions and been involved in investment transactions worth more than $2.5 billion. </p> <p>One of Whitney’s notable projects was handling real estate negotiations for the California Institute for Regenerative Medicine (CIRM). Also, Whitney was one of the major facilitators for San Francisco’s Mission Bay Science and Technology Park, a 12 million-square-foot mixed-use development project, consisting of commercial, residential, life science, clean technology, information technology, and the University of California, San Francisco (UCSF) research center. Also, he was the founding co-partner of the Bryant Street Pier International Cruise Terminal, a 750,000-square-foot mixed-use project, which was to be built at the San Francisco pier in 2001. </p> <p>Whitney, a key advisor on Bay Area and China relations, helped start the Bay Area Council’s China Initiative and Signatory to the Council’s Memorandum of Understanding with China Yangtze Council. He also co-founded San Francisco’s economic initiative ChinaSF. </p>