When a country that has stringent policies against investing in U.S. real estate starts breaking down its own policies, then that spells good news for that country’s investments. As Jeffrey Lenobel, real estate group chairman for New York law firm Schulte Roth & Zabel LLP, said, major Chinese banks are “bullish” when it comes to real estate investments in the U.S. – this is why the China Investment Corporation’s move to help on refinancing a Carlyle Group co-owned Manhattan office tower is seen as a positive thing [1]. This move only proves that the CIC fund, amounting to $300 billion sovereign wealth, is stepping into the U.S. real estate investments.

Joining forces with New York’s AREA Real Estate Finance Corporation, the fund will purchase an unspecified preferred equity stake in the office tower. The property, says AREA president Bradford Wildauer, is in the 27-story building in 650 Madison Ave., and houses the headquarters to Polo Ralph Lauren Corp. Foreign purchases have the potential to provide serious help in cutting down the $3.2 trillion mortgage debt outstanding that the U.S. commercial real estate industry has acquired as of September 30. 2010. This outstanding debt can only be cut off with a $1 trillion additional equity, which could be achieved by a sevenfold jump in purchases from China.

Last year, the U.S. real estate market saw improvements when it came to commercial property acquisitions from the 15 largest foreign countries. From 2009’s $3.8 billion, the number has almost doubled at $6.7 billion in 2010. Even Chinese purchases have made a huge jump from $18 million in 2009 to $127 million in 2010. Beijing-based director of research for real estate and property service firm Knight Frank’s, Paul Lin, shares, “CIC has always wanted to get into the overseas real estate market and they are looking for opportunities in big cities. CIC is very powerful but it won’t be very aggressive. I don’t think it’s aiming to take over half of Manhattan.”

[1]http://www.bloomberg.com/news/2011-01-03/cic-backs-manhattan-tower-as-china-steps-up-u-s-real-estate-investments.html