(Bloomberg) -- Ron DeSantis rattled corporate America by making Walt Disney Co. a target of his conservative culture wars. Now, the Florida governor’s campaign to rid the state of Chinese influence is fueling a forceful backlash from big-name investors.
A group that represents companies including Blackstone Inc., Steve Ross’s Related Cos. and Barry Sternlicht’s Starwood Capital wants to roll back a law that went into effect in July that bans most Chinese investment in real estate in Florida. Other developers, including home builder Lennar Corp., also are pushing back on the statute. Lobbyists are pressing state lawmakers to pass legislation early next year to relax the restrictions, people involved in the process say.
DeSantis, whose bid for the Republican nomination for president is struggling, has made getting tough on China part of his campaign to woo conservative voters. The Foreign Countries of Concern law, he says, blocks agents of China’s communist regime from buying property near US military bases to use for spying.
Yet the law also bans most Chinese capital from being used to fund projects in Florida, choking off a relatively cheap source of financing for an engine of the state’s economy at a time of high interest rates and distress in commercial real estate. Firms with Chinese investors are barred from taking even small, non-controlling stakes in real estate deals under the statute.
“The law is far-reaching, very, very confusing, and the unintended consequences would be very, very detrimental,” said John Fish, chairman of the Real Estate Roundtable, a lobbying group for dozens of America’s biggest real estate investors, including Citigroup Inc., Blackstone, Related, Starwood and Wells Fargo & Co.
Wells Fargo declined to comment. Citigroup, Blackstone, Related and Starwood didn’t respond to requests for comment.
Earlier this year, Ken Griffin, the founder of the Citadel financial empire and Florida’s second-richest person after Jeff Bezos, was able to win some changes to the legislation — which places restrictions on China, Venezuela and five other “countries of concern” — before it was enacted. Griffin’s lobbyists managed to loosen some of the curbs on home purchases by Chinese nationals.
Read more: Ken Griffin Fought Anti-Chinese Legislation in Florida and Won
The continuing coordinated pushback by companies involved in buying and selling property suggests the law is having a significant negative impact on an industry that is a vast source of jobs and wealth for Floridians. Real estate accounts for 17% of Florida’s gross domestic product, about $244 billion, and generates almost a fifth of its tax revenue, according to the latest Federal Reserve data.
Funding from China has long helped bankroll big projects throughout the state, but in recent months some of that money is drying up amid concern about running afoul of DeSantis’s law.
Developers like Lennar and DR Horton Inc. commonly use limited partnerships to pool funds from investors and buy land to build homes or commercial properties. As a result of the law’s restrictions on Chinese investment, however, Lennar has had to delay at least two development projects in Florida, according to people familiar with the builders’ plans.
Representatives for Miami-based Lennar declined to comment.
“The new law has served as a significant impediment to further investment,” the Real Estate Roundtable wrote in a Sept. 5 letter to the DeSantis-appointed Florida Real Estate Commission, adding that it stands to “limit the freedom of Florida’s future growth.”
There are signs that the lobbying effort is having some success, according to seven people involved in it. The Florida Commerce Department, led by DeSantis Chief of Staff Alex Kelly, proposed rules in September that would open the door for investors from any of the countries of concern to take stakes of as much as 25% in funds that own property as long as they don’t have operating control. But the changes have yet to be adopted and lawyers following the rulemaking process say they still have unanswered questions.
The Department of Commerce didn’t respond to requests for comment about the issues the business community has raised, and didn’t provide a timeline for when the regulations would be formally adopted.
Representatives from the governor’s office and DeSantis’s presidential campaign didn’t respond to requests for comment.
Clashing With Business
The pushback amplifies how some of DeSantis’s signature policies clash with big business, once a vital Republican constituency. His fight with Disney over a law that limits public-school teaching about gender identity alienated wealthy donors who once saw him as an alternative to former President Donald Trump, the frontrunner for the GOP nomination. DeSantis’s administration also targeted BlackRock Inc., the world’s largest money manager, for promoting environmental, social and governance principles.
Billionaire developer Jorge Perez, the 74-year-old CEO of Related Group known as Miami’s condo king, said he’s “totally against” DeSantis’s restrictions on foreign investment in Florida real estate. “I mean, this is something that should not be so politicized,” Perez said in an interview.
More than two dozen states have either passed or proposed limits on Chinese property ownership, but Florida’s law is one of the most restrictive. The American Civil Liberties Union has challenged the law as discriminatory on behalf of a group of Chinese immigrants, and the US Department of Justice has said it’s unconstitutional. The law has complicated the buying and selling of homes by individuals, on top of its effects on investors and builders.
Major real estate investors are worried about repercussions. Executives at Carlyle Group are concerned that the law would complicate the ability to use funds with investors from China in Florida real estate deals, people familiar with the firm’s thinking said. Representatives for Carlyle Group declined to comment.
Since 2018, Griffin had tapped into his $36 billion fortune to become one of DeSantis’s biggest donors, yet ties between the two men have strained. Griffin didn’t donate to DeSantis’ presidential campaign. And, as DeSantis lost ground in the polls, Griffin and other business leaders, like JPMorgan Chase CEO James Dimon, have hinted at shifting their support to former South Carolina Governor Nikki Haley. Trump meanwhile has maintained a double-digit lead.
Griffin saw Florida’s anti-China law as an affront, as it would have barred Chinese citizens from buying property within 20 miles (32 kilometers) of military facilities or infrastructure such as ports or power substations. That would have put almost all of South Florida, where Griffin moved his business from Illinois, off limits.
Lobbyists for Citadel, which has a large number of employees from China, convinced lawmakers to narrow the restrictions for those with work permits, Bloomberg reported in August.
Related’s Perez, who has built dozens of buildings in Miami and beyond over four decades, said banks and investors from China and Venezuela have been an important source of funding. But he said he always called the shots.
“It’s not like I’m getting foreigners that are going to control what I build, or not,” Perez said. “These are limited partners.”
DeSantis’s law, he said, goes too far.
“It’s really making something out of nothing,” said Perez. “Investment should flow freely.”
--With assistance from John Gittelsohn and Felipe Marques.
(Updates with additional details on impact on Carlyle in 19th paragraph.)
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