With a $655 million investment venture in the white-hot Dallas-Fort Worth market, China-based Puyin Blockchain Group enters the United States, joining a raft of acquisitive Japanese and Chinese firms who are speedily changing the landscape of U.S. production home building mergers and acquisitions flow.
The deal, which will provide project financing for Texas-up-and-coming young home builder Serene Country Homes to build 2,300 new homes in Tarrant County’s Sendera Ranch, pairs Shenzhen, China-based PBG with Serene, whose parent company is in Singapore.
A fascinating dimension of the PBG-Serene deal is that it solidifies the first major “blockchain” offerings in the residential real estate market. Blockchain–the digital network infrastructure for the currency known as Bitcoin–represents disruptive transactional innovation in real estate, as it could add speed, greater transparency, and improved safety to the real estate investment process.
A statement about the financing venture notes:
Serene Country Homes is a dynamic and fast-growing home builder in the DFW area. Our mission is to be the leading developer of affordable housing in America, becoming larger than DR Horton, Lennar, or Centex. Headquartered in Singapore, our global company is committed to the responsible construction of quality housing for the masses. Unlike other builders, our capital is sourced exclusively from qualified investors and not from banks. Our business is conducted without encumbrance and our investors fuel our operation of more than $1.2 billion. We are the only real estate company that offers investment opportunities in all areas of real estate; from land acquisition, to home construction, to sale and even rental.
We are pleased to announce a $655 million partnership with the Puyin Blockchain Group of Shenzhen, China to fund the construction of the next 2,300 new homes in Tarrant County’s Sendera Ranch community. This event will establish one of the first “blockchain” offerings in the US real estate market, brought to fruition by this joint enterprise. As a leader in blockchain technology, PBG has created a standard model for asset digitization and circulation. The company provides service to make all business transactions safer, more convenient, and more successful. This represents a major development in the growth of the real estate market in DFW, which is consistently ranked within the top 3 markets in the country.
Here’s an article that explores “3 Ways That Blockchain Will Change The Real Estate Market.” Written a year ago, some of the predicted “futuristic” changes the piece suggests come to fruition with this venture between PBG and Serene Country Homes.
Serene Country Homes popped on to the radar as a going-concern operator in the summer of 2014, as it entered the northwest Fort Worth market’s Hills of Windridge and Trails of Fossil Creek masterplans, laying claim to about 1,400 acres.
Veteran Vegas home building operator Jeff Peterson led the Serene charge, reporting through to Singapore-based Dirk Foo.
The deal comes amidst a flurry of acquisitions–expected to continue in the coming weeks and months, from among a half-dozen or so major firms based in Japan and China. These deals, which include Utah-based Edge Homes’ sale of 70% of its equity to Sumitomo Forestry, and North American Sekisui House’s $468 million gulp of five-state regional powerhouse builder Woodside Homes in the past two weeks, reflect dramatically altered mergers and acquisitions conditions during what many observers believe to be the final third of the current slow recovery cycle.
While strategic U.S. builders–who normally would be the acquiring companies as home building’s high-volume new-home arena consolidates–are being hyper-careful and discriminating with their growth and acquisition investments, foreign entities are on a tear, and are said to be paying much higher prices vis a vis book values than North American based strategics.
One of the catalysts here traces to tax law changes going back to the end of 2015, when the U.S. removed tax disincentives under the Foreign Investment in Real Property Act, or FIRPTA.
Under the FIRPTA rules, foreigners had to pay an additional 10 percent withholding tax on the money they realized from sales of U.S real estate, as well as the federal, state and local taxes that U.S. investors pay. With the recent FIRPTA changes, the government provides a more favorable tax treatment to foreigners investing in U.S real estate.
Perhaps more importantly, current political and social conditions in both Japan and China provide motivation for wealth-holders and corporations to move investments into “safe haven” United States holdings. Slow-to-no growth in both economic terms, as well as population and households in Japan, and continued political and cultural ambivalence in China give those with capital–either individuals, institutions, or corporations–reason to want to protect their capital with safe investments in North America.
Thirdly, the cost of capital for such organizations is much lower to Japanese and Chinese corporate borrowers than in the United States right now, which gives these companies a cushion, allowing them to pencil transaction investments with lower returns than U.S. strategics would need to right now.
Put those three big motivators together with expectations of a strengthening U.S. dollar and a predicted growth surge in America promised under the new presidential administration, and you’re looking at continued expansionist initiatives from players like Sumitomo, Seksui House, Daiwa House, PBG, as well as at least two other China-based firms we know are trolling for operators interested in a deal.
We plan to devote one of our Housing Leadership Summit sessions, May 8-10 at the Ritz Carlton Laguna Niguel, to this particular part of the mergers and acquisitions arena, and expect to have several representatives of the acquiring organizations as panelists. We hope you’ll join us there.
