Real Estate Trends Today: Foreign Investors

1
Real Estate Trends TodayForeign Investors
Investment In the United States of America

• NAR Leadership Summit
• Chicago, IL
• August 18, 2005

2
Globalization

• The movement of countries, companies,
  organizations and people toward a single market
  environment
• The world is getting smaller and smaller

3
Hows it going so far?
Two minutes and Im out of here
Who is he to tell us this?
Why, oh why, did I sit in the front row?
If I keep smiling maybe he wont call on me.
4
WHY do we care???
Opportunities are out there for us to capture

• If you are a Real Estate Practitioners
• If you are a staff member of an Association
  and/or commercial board

5
Immigration to U.S. By Decade
6
Foreign-born live in the US
Total number of foreign-born living in the US?
31.1 m
3.1 m
80.1 m
8.1 m
100 m
Show answers
Reset
7
Foreign-born live in US
31.1m
38
28
23
11
US Census Bureau 2000
8
Population Changes in US
Population in US (2002)
282 million
14
Population in US (1990)
248 million
Foreign Born (2002)
31.1 million
57
Foreign Born (1990)
19.8 million
9
How about Illinois
Population in IL (2002)
12,331,000
7.88
Population in IL (1990)
11,430,602
Foreign Born (2002)
1,338,000
41
Foreign Born (1990)
952,272
10
Percentage Distribution of Foreign-born live in
Illinois

• Latin America 47.8
• Europe 25.5
• Asia 23.5
• North America 1.3
• Africa Oceania 1.9

US Census Bureau 2000
11

• Overseas
• Real Estate InvestorsSet Sights on U.S.

12
Real Estate Portfolio Geographical
Distribution (2004 AFIRE Annual Survey)
13
Foreign Investment in the USA

• 1 out of 3 has foreign origin
• 1 out of 5 in residential loan
• 1 out of 10 in commercial loan
• Chinese holdings of US Treasury securities
  currently at US230 billion, second only to Japan

14
Foreign Direct Investment in US Real Estate (1987
2003) BEA, US Dept. of Commerce
15
Why Invest in the United States?

• Solid returns
• Investment security
• Residency and citizenship
• Diversification
• Owners rights
• Quality! Quality! Quality!
• Hedge for the future
• Movement of funds
• Technology considerations
• Currency exchange

16
Solid Returns

• Ability to achieve stable returns
• Unable to match in other countries the internal
  rate of returns (IRR) here in the US

17
Investment Security

• Capitals safety
• Security of return on and of the initial capital
• Provides a safe, secure environment that other
  countries may lack of due to
• Governmental influences
• Government instability
• Currency fluctuations

18
Capital Appreciation (2004 AFIRE Annual Survey)
19
Residency Citizenship

• Eventual possibility of gaining US citizenship or
  permanent legal residence
• Investors desire to place capital and financial
  interests close to family interests both directly
  and indirectly affects their decisions

20
Diversification

• Investors diversification strategies involve
  geographic relocation to increase the capitals
  safety and stability
• Diversifying funds from one country to another
  often is beneficial

21
Owners Right

• Ownership limitations for foreign interests are
  almost nonexistent except investors must follow
  income and disposition reporting requirements

22
Quality of Investments

• Abundance of high-quality, investment-grade
  properties
• Investors favor the quality and size of US
  investments over comparable properties in other
  countries
• Important element when contemplate the need for
  exit strategies

23
Hedge for the Future

• Hedge against possible of inflation in their own
  countries
• Also hedge against flucatiotn of currency
  exchange fluctuations

24
Movement of Funds

• Difficult to move interested funds out of some
  countries inhibits foreign investors from placing
  monies there
• The ability to move funds in and out of the USA
  with ease is very appealing

25
Technology Considerations

• Technology, such as email and the Internet,
  affects the speed and ease of making real estate
  investments

26
Internet Access Americas (2004 population)
68.3

• North America 325,300,000
• Central America 140,700,000
• South America 362,200,000
• Caribbean 38,800,000
• Total 867,000,000

10
10
6.2
2-2
27
Currency Exchange
28
Euro

• What happened to the Euro lately?

29
Approx. 30 Discount
30
Who are the Buyers?

• German Funds
• Legislative changes increase the amount Germans
  can invest outside EU
• Seek secure investments that offer stable cash
  flow with credit tenants with minimal rollover

31
Who are the Buyers?

• Australian Funds
• Limited domestic investment opportunities
• Seek stable, annuity-style returns over time
• Prefer JV with US operating companies

32
Who are the Buyers?

• British Funds
• Due to the currency play dollar still cheap
  compared to the British pound, investors feel
  they are getting more for their money

33
Who are the Buyers?

• Israeli Funds
• Government recently relaxed restrictions that now
  permit Israeli funds to invest up to 20 of their
  assets overseas compared to 5 previously
• Seek value-added opportunities, particularly in
  the New York market

34
What are Investors Buying?

• Retail
• Multifamily
• Hotel/Leisure
• Industrial/RD
• Office

35
What are Investors Interested in Buying?
(2004 AFIRE Annual Survey)
36
What are Investors Buying?

• Attractive, high-quality buildings
• Credit tenants on long-term leases
• Limited rollover exposure

37
Where are Investors Buying?
38
(No Transcript)
39
Where are Investors Buying NOW ?

• Prefer 2nd Tier Markets
• Atlanta
• San Diego
• South Florida
• Texas Cities (Houston, Austin, Dallas)

40
What Theyre Looking For

• 31 partnerships/joint ventures
• 23 off-market deals
• 21 non-core alternatives

41
Investors are Buying at What Cap Rates
42
Future Investment in U.S. Commercial Real Estate

• Foreign investors remain bullish on U.S.
• Significant part of the capital wave will remain
  invested in real estate, since some of the
  drivers are long-term phenomena, and the US
  remains of great interest to investors around the
  world
• The transparency, openness, and liquidity of the
  marketplace, as well as its huge size, continue
  to attract large amounts of foreign capital

43
Future Investment in U.S. Commercial Real Estate

• Retail and Industrial are Hot Properties
• Look for more joint ventures
• Smaller overseas funds partnering with U.S. funds
• Japanese investors, who had been predominant
  players during the late eighties, will be the
  third most active buyer of US real estate in
  2005, following Germany and Australia.

44
In Order to

• Offer some suggestions
• for your consideration

45
Take Advantages and Learn from
46
What Should I DO???

• Attend NAR Annual Conference
• Over 1,100 attendance of Realtors around the
  world will attend
• Bilateral Agreement with 66 Cooperating
  Associations in 50 countries (as of Nov 2004)
• Learn more about the CIPS Network
• http//www.realtor.org/international

47
(No Transcript)
48
What Should I Do???

• Take advantages of the FREE toolkits to introduce
  yourself, your agents, your membership to
  international business

http//www.realtor.org/cipshome.nsf/pages/toolkits

49
(No Transcript)
50
www.worldproperties.com
Expanding its focus to address commercial
interests
51

• pkleung_at_ccim.net
• Or
• pkleung_at_sbcglobal.net