Bob O’Brien, partner and U.S. real estate services leader at Deloitte, joined REIT.com for a video interview during REITWise 2015: NAREIT’s Law, Accounting and Finance Conference held in Phoenix.
O’Brien discussed the rise in Chinese foreign investment , as well as the possibilities for a REIT regime in China.
O’Brien noted that Chinese investment in the United States has increased about seven-fold in the past five years, and real estate accounts for a significant portion of that growth.
“We saw a real acceleration of Chinese investment in the U.S. in the fourth quarter of 2013. It carried right through 2014, and we’ve seen it here in 2015,” he said.
The most prominent Chinese buyers are sovereign wealth funds, state-owned enterprises, banks, investment management firms, real estate developers, and high-net-worth families and individuals, according to O’Brien. Their focus was initially on New York, Los Angeles and Chicago, but it has broadened recently, O’Brien said.
O’Brien added that Chinese investors have focused on prime properties and large development projects. “They’ve been a great source of development capital for the industry,” he said.
Regarding a REIT regime in China, O’Brien observed that while some REIT formation has occurred in the past year, there are still many issues to be resolved. Those issues include taxation, as well as whether the REIT regime will be aimed primarily at institutional investors or retail investors.
“The Chinese have always had a real interest in investing in real estate , and the REITs provide a great way to do that,” O’Brien said.
Meanwhile, O’Brien also commented on cybersecurity issues.
He said Deloitte looks at three main elements with regard to cybersecurity. They include whether companies are building mechanisms to protect against an attack, if they are monitoring their systems, and how prepared they are to respond to an attack.
“All of these go well beyond the [information technology] function. The entire organization needs to be part of that effort,” O’Brien said.
Turning specifically to cybersecurity and real estate, O’Brien pointed out that one area of potential risk is wire transfers. And while real estate companies often don’t have a lot of personal information, their tenants do have access to that data. O’Brien added that building management systems could be weak links in security.