Fosun buys 60-story Manhattan tower

Fosun International, China's largest private conglomerate by revenue, agreed over the weekend to buy a 60-story Manhattan tower from JPMorgan Chase & Co for $725 million, the latest sign of the growing appetite of Chinese investors for US real estate.

The purchase of the New York City tower was made by Fosun's subsidiary Summit Glory Holdings. The One Chase Manhattan Plaza is a 2.2 million square foot Grade-A office building with 5 lower levels on a 2.5 acre plaza, which was previously the global headquarters of Chase Manhattan Bank, Fosun said in a statement released Friday on its website.

The price of the landmark building in the international financial center is around 22,000 yuan ($3,547) per square meter, even lower than that of Grade-A office buildings in Beijing, which range in price from about 30,000 to 40,000 yuan per square meter on average, according to market analysts.

Fosun Chairman Guo Guangchang's fortune jumped 48 percent in 2013 from a year ago, resulting in him being ranked No. 31 in Forbes China's Rich List, up three spots from 2012. His conglomerate is involved in pharmaceuticals, real estate, steelmaking, retailing, mining and financial services.

Just a few days ago, Greenland Holding Group Co, a Chinese State-owned property developer, reportedly agreed to buy a 70 percent stake from New York-based Forest City on October 12 and co-develop a $5 billion property project in Brooklyn, New York.

"Fosun is confident it will make a profit on this project," the 21st Century Business Herald reported Saturday citing Liang Xinjun, Fosun's CEO and vice chairman.

Because the interior of the One Chase Manhattan tower is outdated, the rent is 40 percent lower compared with newer buildings in Midtown Manhattan.

Fosun will soon renovate the whole building and be able to increase the rent substantially, Liang was reported as saying.

The seller JPMorgan Chase, the US largest bank by assets, on the other hand, is struggling with legal issues and could face a record penalty of $13 billion over the bank's questionable mortgage practices that led up to the 2008 financial crisis. The heavy fine would be more than half of JPMorgan's profits earned in 2012.

"Commercial property prices in the US tend to be less volatile and risky than the domestic market, and it [the property] generates stable cash flow in rent," Su Jing, a property analyst at Beijing Anbound Consulting, told the Global Times on Sunday.

Commercial property prices soared in China following the government's ongoing curb on speculative investment in residential properties especially in tier one and tier two cities, but oversupply already exists even in major cities like Beijing, Su said.

Overseas property investment is a general trend, which indicates that the investment return of domestic projects are declining, Chen Hewu, a consultant at Adfaith Management Consulting, told the Global Times on Sunday.

It is expected that the Chinese government will turn to reforming the fundamental land pricing system and issuing property taxes rather than enact provisional measures to curb property price hikes, meaning that the golden period for China's property market, which occurred during the past decade, is likely over, Chen said.

China is the second-largest buyer of American properties followed by Canada, according to a report released by the US National Association of Realtors in June.