International Platforms on the Rise to Buy Locally
- Aug 21, 2013
Over the last few years, Figueroa Capital Group has had the opportunity to work with international investors who are looking to buy in the United States. Over the summer, we have seen international companies organizing themselves to invest aggressively in major markets like New York, San Francisco, and Los Angeles. Last month, the downtown Los Angeles Metropolis Development site was purchased by Chinese developer, Shanghai Greenland. They intend to build several buildings and link L.A. Live to the Financial District with a pedestrian-friendly walkway to be named “Avenue of the Angels.” Other groups are looking for hotel foreclosures, notes, and mezzanine opportunities to take over an asset. Many others are seeking retail and educational facilities to create cross-border learning opportunities.
The highlight has been the increasing amount of English-speaking, Western-educated principals who have amassed substantial pipelines of homeland investors looking to find stability outside of their own countries, which have experienced an economic slowdown and increasing political concerns. The sophistication and experience level of large projects in the home country, however, does not always translate into a level learning curve for understanding the capital stack, particularly debt, in the U.S. Taking time to give an overview of the different markets to these international investors (such as explaining how large Los Angeles really is) and creating digestible amounts of capital markets information and a project with good economics can help an international player learn the market quickly. It is also an opportunity to create a reasonable benchmark instead of overpaying for already-distressed assets.
Having access to off-market transactions will be the key to getting traction for such investors. While some may come with cash in hand to buy something quickly, it is often only to test the waters to create a sustainable platform and eventually co-invest with institutional investors in the long run. Successful local leaders will present ideally located properties with good pricing and value, along with access to a local balance sheet that shows experience in working alongside international investors. Rolling out the red carpet to discuss access to U.S. university education and residential housing needs will also help to build a long-lasting relationship.
Foreign investment in the U.S. is a great way to expand the capital pool available for real estate development, business expansion, and most importantly, job opportunities. Without it, interest rates would likely be much higher than they are at the moment, and our economy would come to a grinding halt because the U.S. budget deficit would have to be dealt with in the most authentic terms. Creating and refining a platform that welcomes this type of investment will help to ensure we get through this anemic time of economic growth.