US real estate offers once-in-a-century opportunity, ex-banker says

PUBLISHED : Tuesday, 03 June, 2014, 2:57pm
UPDATED : Wednesday, 04 June, 2014, 3:51am

Three years after leaving Merrill Lynch, Greg Peng is launching his own property fund to invest Chinese money in the US recovery story, with a target of US$1 billion by the end of this year.

He has closed a few deals in New York and Chicago, totalling US$300 million so far.

The former banker plans to set up a blind pool of up to US$800 million this year, to capture the explosive outflow of Chinese cash into foreign property assets expected in the next two to four years.

"Chinese money is flooding outward like a tsunami," Peng told the South China Morning Post.

He sees "a once-in-a-century opportunity" in a rare confluence of factors: the concern about an economic slowdown in China and emigration from the country, the rising number of Chinese studying abroad, and the gradual rise in US asset prices.

"There are many good deals right now," Peng said.

"But in two years, you will find deals are much less attractive," he added.

The United States is no stranger to the veteran dealmaker, who joined Merrill Lynch in New York in 2000. He later moved to Hong Kong and then Beijing.

He left in 2011, after Merrill Lynch sold its real-estate business to Blackstone.

His overseas foray is backed by Cinda, one of China's four state-run asset managers.

Operating through a joint venture, called Cindat Capital Management, Peng has invested in a number of US assets.

These include the famed 5 Beekman Street project in New York, in which a vintage office building will be converted into a boutique hotel managed by Thompson Hotels, with a 44-storey condominium tower to be built on an adjacent parcel.

Peng is in talks for other deals in Boston, Washington, San Francisco and Los Angeles, with help from former Merrill Lynch colleagues, who have advised him on past transactions.

His onshore yuan funds have entered the harvest season, with an average return of over 20 per cent in half a dozen projects operated by small developers.

"Most developers paid us not with sales proceeds, as in their initial plans, but via refinancing, as construction is lagging far behind schedule," Peng said.

In this week's C-Suite interview, Peng shares his views about the mainland property market.