The recent purchase of Burlingame Point—the scenic shoreline site of a future global commercial campus—by a China-based investment group could signify the start of more deals on the Peninsula involving Chinese capital.
“I only see this as a beginning,” said Anton Qiu, the principal and executive managing director with Northern California-based real estate brokerage TRI Commercial. “I will not be surprised [if] in the next couple years there’ll be big purchases in high-rises, residential projects, spec development and high-end retail—across all categories.”
Earlier this month, a joint venture between international private equity firm H&Q Asia Pacific and real estate company Kylli Inc.—a partnership backed by Chinese developer Genzon Property Group—bought the 18-acre waterfront property with sights to build a Class A office complex catering to international technology enterprises.
H&Q and Genzon plan to spend about $300 million to develop the site at 300 Airport Blvd. along Burlingame’s bayfront. It would be the largest office project on the Peninsula in recent memory.
“They are revitalizing an underutilized gem of a property along the bayshore and bringing in more than 3,000 new jobs to Burlingame,” City Manager Lisa Goldman said.
New York-based luxury real estate developer Millennium Partners was the seller. It acquired Burlingame Point in 2006 with the idea of developing the area itself but ultimately decided to sell. The Silicon Valley Business Journal reported that H&Q and its partners paid $48 million for the property.
Although no construction timetable was given, Burlingame officials said in a city news release that they saw the sale as assuring the project will begin soon.
The project would feature 767,000 square feet of office and technology uses with a retail center. It would include two five-story, one seven-story and one eight-story building with structured and below-ground parking. The plan also calls for relocating an existing section of Airport Boulevard to allow for the construction of new open space along the waterfront.
“Burlingame Point is an important addition to our growing Bay Area portfolio,” Hok-Kan Dang, founder and CEO of Genzon, said in a news release from the companies involved in the transaction. “We look forward to working with City of Burlingame and H&Q Asia Pacific to leverage our extensive real estate development experience and technology-related service track record to bring global innovation to this strategically located waterfront space in Burlingame.”
Genzon and its subsidiary Kylli also own the historic office tower at 225 Bush St. in San Francisco’s Financial District.
In this post-recession economy, Chinese investors have increasingly invested in U.S. real estate and the surging Bay Area market. Last year, direct investment in American properties coming from mainland China reached $3.8 billion—a year-over-year increase of 6 percent, according to a February report by commercial real estate services firm CBRE.
In this current boom cycle, Chinese investors first started off with small deals in the housing sector and have progressively pursued larger transactions in both the residential and commercial arenas, Qiu said.
Among some other recent key Bay Area projects financed by Chinese capital are the $300 million residential high rise Silvery Towers at North San Pedro and West St. James streets in San Jose; the $1.5 billion mixed-use community Brooklyn Basin along the Oakland Estuary; and the $300 million Lumina condominium development at 201 Folsom St. in San Francisco.
Also, Chinese real estate company Oceanwide Holdings Co. Ltd. has acquired a twin-tower development site at First and Mission streets in San Francisco for nearly $300 million. Oceanwide’s total investment in building these towers—which would have residential units, hotel rooms and office space—could amount to as much as $1.6 billion.
“Lately, you’re starting to see large investors willing to take on” major projects such as Lumina, Qiu said. “They’ve started to get into bigger deals. I see that accelerating in the next couple of years.”
Chinese investors seem poised to seek more real estate investments outside urban centers into places such as the Peninsula, as evidenced by the Burlingame Point sale. Investors and developers—Chinese and otherwise—are noting major employers opening offices on the Peninsula, particularly central to southern San Mateo County, Qiu said. These employers and their highly skilled workers are attracted to the mid-Peninsula’s transit systems such as Caltrain, proximity to San Francisco International Airport and other amenities.
“There will be a lot of big developments up and down the Peninsula” in the coming years, Qiu said.
“The fact that a foreign investor chose to invest in San Mateo County proves the strength of our region’s international promise in technology startups,” added Mike Moran, the Burlingame-based managing principal with commercial real estate services firm DTZ.
Rendering courtesy of DES Architects + Engineers