Cross-Border Money Flowing Freely Into Leading U.S. Real Estate Markets
By Randyl Drummer For Costar
Cross-border investors played a major role in the first quarter of 2014 as rebounding investment sales activity reached into a growing number of U.S. commercial real estate markets and property sectors.
While China’s economic issues may produce a hiccup in cross-border deal flow, there will be much more investment into U.S. real estate over the next five years from China, Korea, Singapore and other countries, Helsby says. The merger also allows Savills to help service international tenants, particularly from Asia, looking for U.S. space. In one of last year’s largest CRE transactions, the $1.4 billion sale of a 40% interest in New York City’s GM Building, both the buyer and seller were foreign entities. Entities of Chinese developer Zhang Xin and Brazil’s Safra banking conglomerate bought the stake from an opportunity fund operated by Goldman Sachs Group Inc. on behalf of a Dubai-based private-equity firm and the sovereign wealth funds of Kuwait and Qatar. Boston Properties owns the majority 60% interest in the building. “The flows are certainly increasing from non-U.S. buyers: sovereign wealth funds (SWFs), pension funds, other pools of capital, Asia, Canada, Europe and the Middle East,” Thomas said. “It’s a major force in the marketplace.” Betting on future economic growth as the recovery ripples across the country, select markets outside the six largest U.S. cities are now also angling for foreign buyers, noted Mark Gibson, CEO of investment sales and financing specialist HFF, Inc. (NYSE: HFF). “We have witnessed both foreign and domestic capital shifting larger allocations to non-major markets,” Gibson said.
With concerns over rising interest rates subsiding, a stronger influx of foreign and alternative capital has continued to stream into domestic property in search of higher yields, according to analysts and executives for U.S. REITs, CRE services firms and fund managers. Property services giants like JLL, CBRE and HFF are benefitting from a projected 15% bump in property sales activity worldwide, fueled to a large degree by rising foreign capital, according to Mitch Germain, an analyst with JMP Securities. Combined with an uptick in fundraising by alternative investors in the market, commingled capital volume has risen 16% over prior year levels. “We are meeting with increasing success in raising capital to be moved from one region of the world to the other — particularly from Asia — to the other regions of the world, both in [private equity] funds and in separate accounts,” said Bob Sulentic, CBRE president and CEO. Keller Williams Southern Arizona 1745 E River Rd Suite 245 Tucson AZ 85718 520-615-8400 For information on off market properties from $1,000,000 to $6,000,000 email Chuck@dealmakerteam.com Chuck Corriere, MBA 520-400-9811 Follow us on twitter @chuckdealmaker