Auction.com Targets Chinese Investors

Auction.com Targets Chinese Investors

Juwai.com, a Chinese international property portal, and Auction.com, a U.S.-based online real estate marketplace, formed a partnership last month to bring American commercial real estate auctions to investors from China. The venture enables U.S. real estate listings from Auction.com to be advertised on Juwai.com in Chinese, where they will be accessible to the portal’s 2.6 million monthly Chinese-speaking users, both in mainland China and around the world. Juwai.com has also employed a team of journalists to develop content to educate Chinese consumers on the real estate auction process. Currently, the partnership focuses on Auction.com’s commercial property listings, but residential properties may also be added to the mix.

NREI spoke with Auction.com Executive Vice President Rick Sharga to get the details on this innovative venture. An edited transcript of that interview follows.

NREI: Let’s start by introducing Juwai to our American audience.

Rick Sharga: Juwai is very much like a Zillow or LoopNet for Chinese investors—a website where people go to search for and do research on properties. The website is visited by between 2 million [and] 3 million people every month, and these visitors are there specifically to find properties to invest in. Increasingly, they’re looking for properties outside of China, and particularly in the United States. Juwai partners with companies like Auction.com to bring these properties to their visitors.

NREI: What is Auction.com’s motive for partnering with Juwai, and how much real estate does Auction.com hope to sell in China over the next year?

Rick Sharga: We’ve been tracking the enormous interest in U.S. properties by Chinese investors—last year, Chinese investors were the second-largest group of foreign real estate buyers in America, second only to Canadians—and have been exploring ways to reach these investors more effectively and efficiently. We know that we sell properties to Chinese investors today—for example, a Chinese investment group bought the Detroit Free Press building on Auction.com—but it’s hard to track exact numbers since many Chinese investors buy through United States LLCs that have been formed specifically to make these purchases. Juwai presented us with an interesting way to market directly to Chinese-speaking investors in mainland China, Hong Kong, Singapore—around the world, really—in their native language. We don’t have a set number of sales in mind, but our arrangement with Juwai makes this a low-risk/high potential reward opportunity.

NREI: Juwai has 2.6 million monthly Chinese-speaking users. How is the commercial real estate content going to be translated for them?

Rick Sharga: Juwai will handle the translations. They have a staff of 15 journalists who will take our content and convert it. They’ve also offered to work with us to translate some of the questions or inquiries that may come through their site from Chinese-language buyers.

NREI: How familiar are Chinese investors with real estate auctions, and with the American real estate marketplace? How are they being educated about this?

Rick Sharga: Real estate auctions are foreign to most Chinese investors. So we’re working with the Juwai team to create educational content that explains the process and how it works. We’ve done educational webinars and live sessions for U.S. audiences in the past, and may try to find a way to do those for Chinese audiences as well. And we’re in discussions with the Asian Real Estate Association of America about partnering with their Chinese-speaking brokers and agents to help communicate more effectively with Chinese buyers who aren’t familiar with U.S. real estate. and especially with the auction process.

NREI: Initially the partnership will focus on multifamily, retail and office buildings as well as hotels. Are the Chinese most interested in these sectors? Will other types of assets be added—for instance, industrial and residential?

Rick Sharga: Chinese investors have been buying office buildings and hotels in the U.S. for the past few years, particularly in New York and California. Last year, according to our team at Auction.com Research, these investors began to expand into other sectors, like retail and multifamily, and other regions, like Houston and Chicago. There’s been a huge appetite for U.S. residential properties as well, especially along the coasts and in Texas, and we may ultimately include residential properties in the listings that we send to Juwai. We wanted to start with commercial real estate assets first, because the number of assets is easier to manage, and because it’s likely that commercial real estate investors are a little more sophisticated. As we work out any glitches in the process, we can expand to accommodate smaller investors in the residential space as well.

NREI: Auction.com is banking on the Chinese embracing online real estate auctions. What’s the outlook so far?

Rick Sharga: This really is a low-risk/potentially high-reward scenario. We’re starting out by providing a few hundred commercial real estate assets, which certainly minimizes our marketing costs and potential risk. We think online auctions are actually a better way for Chinese investors—and other foreign investors—to participate in U.S. real estate transactions, because they give a global audience a way to view, perform due diligence and actively bid on properties from thousands of miles away. Auction.com will give these investors the chance to purchase properties they might never have known were available in a more traditional sales process. I think once they’ve gotten past the unfamiliarity with the process itself, they’ll find it a refreshing alternative to the paperwork-intense, time-consuming process they’ve been using so far. This ultimately puts the decision-making back in the hands of the buyer, which is probably something that’s appealing to investors, no matter where they’re from.

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