Changing Gears

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TOLEDO, OH –Toledo Mayor Michael Bell is serious about Chinese investment in his city. When he gives you his business card, one side is in Chinese. His office is adorned with Chinese screens and other gifts from his travels there.

Mayor Michael Bell's office is adorned with Chinese gifts like this screen.

“America is always waiting for people to come to them,” says Mayor Bell. “Well, we’re on the other side now and we have to be able to reach out and market ourselves.”

A year and a half in office, the independent Mayor’s efforts are paying off. His first trip to China was in September. Five months later, he sold a struggling city-owned restaurant complex to two Chinese investors for more than $2 million. Bell and economic development folks in Toledo say these deals are all about relationships. They’ve worked hard to make those connections and pitch the Chinese on the many opportunities in this unfamiliar city.

These first Chinese investors were so enamored with Toledo and its available real estate that they decided to make a bigger deal.

Along Toledo’s waterfront is an area called the Marina District. Right now, it’s just weeds and a road to nowhere.

Marina District: Not much to see here yet..

“We’ve got undeveloped land that’s been about ten years right now in the making,” says Dean Monske, who heads an economic development group called the Regional Growth Partnership. Right now, it’s more than a hundred acres of prime real estate. It has a skyline view, easy access to the Maumee River, but nothing there.

The city spent millions cleaning up the site to get it ready for someone to develop, and had plenty of false starts. Monske says there were about eight ceremonial groundbreakings over the years, but local investors just couldn’t get the financing together to build something.

China, though, is full of the newly rich looking for places to put their cash. Land in China can be expensive, and the state can take it away whenever it wants. So, smart investors want a piece of stable countries with a lot of land: Australia, Canada, and increasingly the US.

Dean Monske stands in Toledo's Marina District.

“When they actually come here and see it for themselves and say ‘you’ve got to be kidding me, there’s empty land right across from your main downtown right on the water,’ that’s simply unheard of,” Monske says.

Toledo’s city council recently approved the sale of the Marina District to the Chinese investors. They paid $3.8 million in cash—more than the appraised value. For a mayor like Mike Bell, this is the dream deal: no abatements, no loans or tax breaks. The Chinese, he says, just wanted the city to accept the cash and get out of the way.

The Mayor says the Chinese plan to build housing and shops on the site. It’s supposed to be a kind of international village, and they want to attract more foreigners to the apartments. He estimates the total investment could be more than $200 million. That would make it among the largest Chinese real estate investments in the country if it goes as planned, but that’s a big if.

“If you have a lot of expectations about what’s going to happen next, that’s where you have to be careful, says Derek Scissors, an Asian scholar at the Heritage Foundation in Washington. He thinks the Toledo plan looks like a good deal with savory investors. The city was also smart enough to give itself the option to buy the land back for the same price if nothing happens there in five years. But Scissors warns that the Chinese are new to American real estate.

“We haven’t seen any sign that the Chinese know anything about property development in the US. What they’ve done is bought assets that they want in their portfolios. When this idea that they’re going to come in and they could be a big factor in the Great Lakes region, the money could be there, but if they’re involved in the decisions, there’s no sign they know what they’re doing,” Scissors says.

Scissors estimates that Chinese businesses will invest $6 billion in the US this year. That’s tiny compared to how much China owns in US bonds. Real estate is an even smaller part of that, but it’s grown from just about nothing less than a decade ago.

Scissors thinks there are real opportunities here for Midwest cities looking for investment, as long as they do their due diligence on the investors.

Critics like Ohio Democratic Congresswoman Marcy Kaptur raised concerns about potential communist money being involved in deals like this. She’s been a big supporter of labor and some unions worried they wouldn’t get much work from a foreign investment. Add Julie Slota in a Toledo suburb to those wishing it were local money.

“I think it should be the local investors and keep the Chinese out of it,” she said.

Nearly everyone you talk to near the Marina District, though, expressed relief that someone has finally taken over this land. Stan Sagan owns a shop across the street selling board games.

Stan Sagan

“ We’ve had so many hopes as far as having a development anchor for this part of the downtown Toledo that I think it’s a relief that something is going to happen, and everyone is just crossing their fingers,” he said.

The Mayor and the economic development companies are hoping these first Chinese deals are just the beginning. Northwest Ohio’s Regional Growth Partnership has opened two offices in China. Officials hint there could be more deals announced in the coming months: maybe a Chinese company opening a factory or headquarters. If any of that happens, it could be a role reversal of globalization: a Midwestern city gaining jobs and money from China.