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| Feature: Eastern Promise |
Perilous Paths to China
Rebecca Fannin
09/01/2005
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 Ta-lin Hsu has two decades of experience making
private equity investments in
Asia—and he has the
contacts to
prove it. When Hsu has a problem in Shanghai, he
calls the
mayor’s office for assistance. A former IBM scientist who went on to
found the Asia Pacific division of Boston-based Hambrecht
& Quist
Capital
Management, Hsu has invested $200 million
of his and his
investors’ capital into
15 Chinese ventures and
has mentored a new
generation of investors in Asia,
including
his son, Mark.
Hsu,
an American citizen who grew up in Taiwan
and
is fluent in Mandarin,
would appear to be a master of
navigating the Chinese
private equity
labyrinth. But even the
most seasoned professional can trip up in
this
volatile
market.
 In 1997, Hsu purchased 350 acres in
Shanghai’s Pudong
district, a triangle along the Huangpu River that is
home to the
Shanghai Stock
Exchange and seems to sprout a new
skyscraper every
week. Property values there have more than doubled
since Hsu, with HSBC and
Deutsche Bank as
coinvestors, agreed
to pay $50 million for the land,
with plans to develop
upscale
villas and a golf course on
it.
But two years later, Hsu
discovered
that the two brothers
who had sold him the land had
never fully paid for it
themselves and
did not have a clear
title. Hsu’s purchase agreement disguised
this
vital detail
within opaque, conversational wording. Yes, he readily
concedes, he should have caught it. He and his investors did,
at least,
have a
means of legal recourse. They had structured
the investment in
the Turks &
Caicos Islands, so they were
able to litigate the
matter in that country’s
courts. They
spent $10 million in legal fees,
but ultimately the court awarded
Hsu and his partners $66.5 million in
damages. Following that,
Hsu spent several
more months convincing
Shanghai government
officials to change the documents and
award him
ownership of
the land. It was only this year that he was able to
restart
his construction cranes.
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