Investors From Aboard Eye US CRE

Overseas investors could be on their way in droves to invest in US commercial real estate, according to the international real estate advisory firm Savills.

March 19, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user doug.siefken

Overseas investors could be on their way in droves to invest in US commercial real estate, according to the international real estate advisory firm Savills. The overall perception among such investors–as it is among domestic investors–may be that the bottom is here for US CRE, but foreign investors have another consideration as well: the Real Estate Revitalization Act of 2010 (HR 4539), which if enacted would lower the taxes they would pay on their American assets.

“Foreign investors like the US real estate market for different reasons,” Borja Sierra, executive managing director of New York City-based Savills US, told CPE. “For example, Asian investors can utilize lower borrowing costs from their home banks, and they also see US real estate as a hedge against potential inflation or volatile changes in their currency positions.”

British and European investors are following a different approach, Sierra added. “They’re chiefly pursuing the top five largest US metros to acquire high-quality, core office buildings with long-term leases in place, but they have yet to deploy any sizeable amount of capital into these markets.”

As for Middle Eastern investors, “whose fortunes can no longer hinge on the spot price of oil, [they] fall into two camps: those looking for bargains in the top five markets due to motivated sellers,” Sierra continued. “The second category seeks opportunistic (such as 25%-plus IRRs), but is willing to accept a different risk profile. Both camps identify US commercial real estate market as a safe long-term investment.”

Wherever they come from, foreign investors have their eyes on the proposed tax change. The new law would essentially repeal an ’80s-vintage law that levies as much as 55 percent on capital capital gains realized from the sale of US CRE or shares in REITs for foreign owners.

The Latest Numbers Don’t Budge Much

Is it news when nothing changes? That was the report from the U.S. Bureau of Labor Statistics on Thursday, noting that for the month of February, the Consumer Price Index didn’t change from the month before, though the it did increase 2.1 percent compared with February 2009.

The Conference Board Leading Economic Index was almost unchanged for February, but did increase by a meager 0.1 percent, which followed a 0.3 percent gain in January. “The leading economic index points to moderately improving economic conditions in the near term,” is how Ataman Ozyildirim, an economist at the Conference Board, put it in a statement.

Wall Street was mostly up on Thursday, with the Dow Jones Industrial Average gaining 45.5 points, or 0.42 percent, and the Nasdaq up 0.09 percent. The S&P 500 ended down a scant 0.03 percent.