Beating the July heat in shorts, a loose polo shirt, Crocs and a seersucker porkpie hat, Frank Yuan doesn’t come off as a high-powered international financial intermediary.
But his tiny firm, ASAP Expo Inc., has seized on a hot and growing business, shepherding tens of millions of dollars from China into L.A. hotels, much of it from big-name investors.
A veteran of the apparel trade, Yuan helped build massive manufacturing wealth in China and is now using his ties there to direct Chinese money back to the United States as the flow of cash from East to West speeds up. Chinese investment in the United States could reach a record $8 billion this year, much of it into hotels and other real estate.
In its latest deal, ASAP brokered the purchase of a DoubleTree hotel in San Pedro by the U.S. arm of China’s state-owned aerospace conglomerate, Aviation Industry Corp. of China, or AVIC. The $12 million deal closed in March.
That’s a big deal for a small firm, especially for one that has only been in the real estate game a few years. But what the firm lacks in experience it makes up for in relationships with Chinese and Chinese-American investors, relationships that Yuan built over four decades as an apparel importer.
“Everything is timing in life,” Yuan said. “In China, all those people who made money in apparel, now they want to diversify in the U.S. They all come to me.”
Chinese money has been pouring into Los Angeles and the rest of the country over the past few years. New York consulting firm Rhodium Group reported total Chinese investment in the United States hit a record $6.7 billion in 2012 and that this year’s figure will likely be higher. In the first quarter alone, Chinese investment here was $2.2 billion.
Alan X. Reay, president of Irvine hotel brokerage and consultancy Atlas Hospitality Group, said hotels have been of particular interest to Chinese buyers. He predicted that over the next few years Chinese investors will buy more American properties than did Japanese investors in the 1980s or Korean investors last decade.
If that proves out, old relationships could continue to pay off for Yuan and other well-connected Chinese advisers in the United States, said Joseph Fan, president of Diamond Bar hotel management company Brighton Management LLC, which operates several hotels owned by Chinese investors.
He said Chinese firms, even huge ones such as AVIC, are more likely to work with a small-time adviser they know than with a big-name firm they don’t.
“It’s a culture thing,” Fan said. “It’s all about relationships. If I’m in China and you’re in the U.S., and I know you, I’m going to call you and ask you to help me out instead of going to a large brokerage house. I see that time after time.”
Taiwanese import
Yuan, 64, was born in China and grew up in Taiwan after his family fled the mainland’s communist regime. He came to the United States in the 1970s, earned an M.B.A. from Utah State University and moved to Los Angeles.
He quickly started an import business, buying pants from Taiwanese factories – some of them run by college classmates or family friends – and selling them to American wholesalers.
Over the years, Yuan branched out into real estate, buying apartment buildings and developing a few residential properties, later starting Cyber Merchants Exchange, an Internet company that allowed retailers to order directly from small Asian apparel factories. He took the company public through an IPO in 1999, but it was never profitable and folded in 2006.
Yuan continued in the apparel trade, operating a Las Vegas trade show for apparel manufacturers. The ASAP Show, created as part of Cyber Merchants Exchange in 2001, was spun off from the failed company and continued to operate until 2009.
That year, with revenue dwindling, ASAP scrapped its trade show and tried to become a type of investment bank, specifically focusing on helping Chinese companies go public in the United States and Germany.
But Yuan and ASAP broke into the real estate market when a friend from the apparel industry asked Yuan to help him buy a home in Los Angeles. That friend was Huang Wei, chairman of Shenzhen, China, investment firm Shenzhen New World Group Ltd. Huang made his money in the apparel business and Shenzhen New World owns a massive wholesale apparel market similar to downtown L.A.’s California Market Center.
In 2010, Yuan and ASAP advised the company on its $60 million purchase of the former Marriott Downtown hotel at Figueroa and Third streets. Yuan said he helped Huang and other Shenzhen executives understand offer documents from the hotel’s seller, GE Capital, and from the hotel’s management company. Shenzhen New World, in turn, gave ASAP free office space at the hotel for five years. Yuan later advised Shenzhen on its $90 million purchase of the Universal Sheraton in 2011.
“It seems like Frank and the chairman of Shenzhen go way back,” said Brighton Management’s Fan. “Initially, he was referring to Frank as their manager in the United States and so on. Frank’s been around.”
Though public, ASAP – which trades over the counter for less than a dime – is a tiny family operation: Its only employees are Yuan; his brother, Norbert; his son, Jerome; and an administrative assistant. But thanks to its recent hotel deals, its revenue is growing fast.
The company reported net income last year of about $55,000 on revenue of $493,000. In this year’s first quarter alone, its revenue topped $542,000 and profit jumped to $326,000.
All of ASAP’s revenue comes from consulting fees; it charges clients a small percentage of the value of real estate transactions and other deals, Yuan said, though the details are not disclosed in the company’s regulatory filings.
Trusted advice
In its typical representation of a Chinese investor, ASAP finds and presents potential acquisitions, submits offers, handles negotiations with sellers and, later, with hotel brands, unions and management companies. In some cases, including the San Pedro DoubleTree, Yuan is himself an investor.
ASAP has advised AVIC on all its hotel deals in the United States, and while the aerospace conglomerate is the majority owner, Yuan and other investors have taken minority stakes. Yuan, who made his investment personally, not through ASAP, said he took out a mortgage on his San Marino home to buy about 10 percent of the DoubleTree.
Yuan said he wants not only to advise on hotel acquisitions, but also stay on as the owners’ investment manager, overseeing U.S. properties. That should give ASAP an ongoing revenue stream after Chinese investment here slows down.
“I think we have another good two or three years,” he said. “If we can coordinate and manage the assets, we should build a nice fee income.”
He’s continuing to work with AVIC and Shenzhen New World, but said he also has a stable of wealthy Chinese individuals looking to buy into the U.S. hotel market. Many of those clients are, like Huang, acquaintances from Yuan’s years in the apparel industry.
“Apparel company owners are making so much money from apparel, then they want to expand in different industries,” Yuan said. “Mostly they like real estate. They understand the value of the land and the replacement cost.”
When Chinese investors buy properties here, it’s common for them to work with a Chinese adviser such as Yuan, even if they also work with a big brokerage, said Michael Blahosky, a senior vice president in the Westlake Village office of Denver hotel brokerage HREC Investment Advisors. He represented the sellers of the San Pedro DoubleTree in the AVIC deal and said he has worked with Yuan on other deals.
“I’ve seen Southern California-based Chinese working either with offshore money or money from Chinese people here who don’t speak English well,” Blahosky said. “There’s usually an intermediary in that situation. And Frank is very connected to the Chinese community, here and in China.”
Those connections led Yuan to AVIC, which is now in escrow on three more U.S. hotels – all deals brokered or arranged by ASAP. Sherman Zhang, president of AVIC’s American operations, said he’s pleased with Yuan’s counsel.
“He’s not from a big brokerage or a big investment advisory firm, but he understands this business,” Zhang said. “And he has helped other invests from China to invest in hotel business in the USA.”
Zhang said he has known Yuan for five years, but doesn’t recall how they were first introduced.
“It’s a small community,” he said. “People know people.”
