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Growing sphere of influence: China company is latest foreign entity to enter New Jersey

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China Construction America drew some attention to itself in April, when it purchased this Morris Township office building for $71 million in an all-cash deal.
China Construction America drew some attention to itself in April, when it purchased this Morris Township office building for $71 million in an all-cash deal. - ()

In a year in which splashy deals have been hard to find, one little-known developer has caught the attention of New Jersey's real estate industry.

The firm, China Construction America Inc., marked its arrival in the state in April when it paid $71 million in cash for a Morris Township office building. And earlier this month, it sealed a reported $68 million deal to acquire a prime Jersey City development site that could house a 1,000-unit apartment complex.

It was enough to earn the company a spot on our Power 50, making its debut at No. 45.

The moves by China Construction America come as a buzz grows in New York City, where Chinese investors have closed several high-profile real estate deals in recent months.

And while experts say it's far too early to tell if more Chinese firms will shop for property west of the Hudson, it certainly wouldn't come as a shock.

"People invest in packs, if you will," said Andrew J. Merin, a vice chairman in Cushman & Wakefield's East Rutherford office and No. 46 on this year's Power 50. "I would not be surprised to see some additional Chinese investment along the waterfront."

Aside from simply grabbing headlines, Chinese investment in U.S. property has grown this year. Firms originating in the Far East country have invested nearly $2.2 billion through mid-October, according to the New York-based research firm Real Capital Analytics. That's double the sales volume in 2011, when the highest total over the past six years was recorded.

Real Capital also found that Chinese investors account for the third-highest sales volume among foreign countries or regions year-to-date, behind Canada and the Middle East.

The infusion of Chinese funds is part of "a new wave of capital from overseas, specifically East Asia," said Dan Fasulo, Real Capital's managing director. While he was more skeptical about the wave hitting New Jersey, he said investors from the region are able to get much higher yields in the U.S.

"It's a relative value play for a lot of these large foreign investors coming to the U.S. right now," Fasulo said. "We look cheap."

Last month, the Hong Kong-based conglomerate Fosun International Ltd. announced it would acquire One Chase Manhattan Plaza in Lower Manhattan for $725 million. And other Chinese developers have moved to buy large stakes in a Brooklyn apartment project near the Barclays Center and in the coveted General Motors Building in Manhattan, according to published reports.

China Construction, the U.S. subsidiary of China State Construction Engineering Corp., has offices in Jersey City but did not return multiple requests for comment for this story.

The company, however, has not flown completely under the radar. It announced in June that it had won a $125 million contract to renovate the Pulaski Skyway. And it's not the only foreign company making a move in New Jersey.

Gaia Real Estate Investments, an Israeli-backed firm, acquired a Secaucus office building in June from Hartz Mountain Industries. The $56 million deal came two years after Gaia bought a Jersey City office tower in 2011, also from Hartz. The firm also has traded multifamily properties in East Orange and Jackson.

Historically, outside investors would look at Manhattan real estate, "draw a pretty hard line in the Hudson and not really venture over to New Jersey," said Jose Cruz, a senior managing director with HFF. But these days, "there is definitely more of a sentiment where groups are open to investing in the state."

"Today, New Jersey is an option," Cruz said. "It's not every town, it's not every corridor, but it's an option."

Something as simple as a change in a foreign country's accounting rules can cause investors to move into U.S. real estate, Cruz said. In the case of China, experts say companies are flush with cash and in need of places to park their money.

"They have billions of dollars to get out," Merin said.

Cruz said bringing in this new capital is good for everyone.

"You don't want to keep cycling through the deals here with the same local buyers," he said. "You want that new capital, you want that new investment, you want that focus, and you want that competition to help prices stay where they should be."

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