Multi-Family Properties Might Be The Way To Multi-Millions

In the current commercial real estate market, investing in multi-family homes should be on the radar. Multi-family properties don’t always have to be 20 floor sky rise apartments in a big city. They can be smaller duplexes, town homes Read more

New Real Estate View: Why The Homeless Are Big Business In New York

It's a grim scenario: In New York, there are more than 50,000 homeless. Of that number, 21,000 are children, an increase of 21 percent from last year, according to a report by the Coalition for the Homeless, a New Read more

Red Is the New Green – Chinese Investors Eye US Assets

***This blog entry is a guest post from Elton Steinberg, Marketing Associate at United Realty*** American fund managers should be aware of current and future trends that may make the Chinese account for a more significant portion of overall foreign Read more

Gimme Shelter - Foreign Investors Seek Returns and Safe Haven in US Real Estate

***This blog entry is a guest post from Elton Steinberg, Marketing Associate at United Realty*** Foreign investment has been a significant driver of the US real estate market recovery. Investors from across the globe have been responding to negative stimuli Read more

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Gimme Shelter – Foreign Investors Seek Returns and Safe Haven in US Real Estate


***This blog entry is a guest post from Elton Steinberg, Marketing Associate at United Realty***

Foreign investment has been a significant driver of the US real estate market recovery. Investors from across the globe have been responding to negative stimuli abroad by investing in US real estate. Investing in US real estate provides foreign investors protection from economic

instability and foreign government corruption, while offering significant returns compared to low performing bonds. Such benefits have led foreign investors to favor direct investment in US properties and shy away from funds that may lessen risk.

Japanese investors have historically had confidence in the benefits offered by investments in US real estate. Often close partners with US businesses, Japanese investors have in the past sunk billions of yen into acquiring US assets. Recent fear about future depreciation of the yen has made investment in US real estate increasingly advantageous. Investing in US real estate allows Japanese investors to protect their wealth against the negative effects of Japanese monetary policy. Assuming that the dollar remains strong, investments in US real estate enable foreign investors to strengthen the value of their holdings. The advantages of US real estate as an inflation hedge coupled with the current high rates of return have motivated Japanese investors to continue to transfer wealth to the US.

While traditional foreign investors in US real estate have recently had a significant impact on the market’s recovery, less traditional foreign investors are increasingly likely to drive future growth. Brazilian, Russian, Indian, and Chinese investors have been eyeing the US real estate market as an opportunity for investment. Each responding to local conditions, BRIC countries have taken note of the benefits offered by investing in US real estate.

Enriched by the rapid growth of the Brazilian economy, a growing number of Brazilian investors have worked to protect wealth from the negative impact of local instability and earn profits from safe investments. While impressive returns are offered by Brazilian real estate investments, inflation and government corruption in Brazil motivate many Brazilian investors to prefer less risky US real estate investments. A fulminating public has made many Brazilian investors fearful of future political instability and economic fallout, giving another incentive to transfer wealth to the US.  Like many wealthy Central and South Americans, Brazilians have flocked to Miami, purchasing stakes in local assets.

A recent spree of acquisitions by Russian investors has surprised American real estate experts as Russians have been providing a more significant portion of capital for US real estate acquisitions. Apparently dissatisfied with the benefits of investing in art and other luxury items that fail to yield desirable returns, Russian investors have begun purchasing trophy properties in Manhattan and Miami to gain more appropriate returns and shield wealth. Following the economic crisis in Cyprus, Russian investors have been seeking an alternative safe haven. Along with the advantage of keeping wealth out of reach of the Russian government, investments in US real estate provide Russian investors with significant returns and residence in attractive locations. It is becoming increasingly possible that Russian investors will be a consistent source of capital for investment in US real estate.

Considering the volume of foreign investment in US real estate, one would think that domestic funds investing in US real estate and catering to foreign investors would raise capital with ease. On the contrary, a number of major funds have been forced to exit the market. While such funds offer the services of managers with expertise in US real estate and opportunity to diversify, many foreign investors have avoided such investments. It would seem that communication difficulties have prevented foreign investors from realizing the advantages such investment funds offer. A variety of conditions motivate foreign investors from different countries to invest in US real estate. Perhaps, foreign investors expect American funds to cater to each of their disparate needs when encouraging foreign investors to trust them with their wealth. It will be interesting to observe whether or not foreign investors remain convinced that direct investment is the optimal strategy as foreign investment continues to drive growth.

Posted on by Jacob Frydman in Commercial Real Estate, Foreign Investors Comments Off

Preparing For Coming Inflation

Whenever you turn on the news, you hear about our country’s $16 trillion of national debt which we cannot pay off.  Unfortunately, that’s just a small portion of our country’s financial problems.  Did you know that we also have more than $60 trillion of unfunded government pension obligations, unfunded Medicare and Medicaid and social security liabilities?  And that this debt is increasing at more than $1 trillion per year?

Just think – the US owes more than $76 trillion that iInflation Hits Real Estate Investments In Philadelphiat can’t pay off.  Worse, none of our politicians are willing to raise taxes or cut spending to deal with that problem, because if they raise taxes or cut spending they get booted out of office! As expected, they are more concerned with holding on to their jobs.

So how is our government going to deal with this problem? The same way governments have dealt with this problem throughout history – they print money.

By printing money they inflate the currency, and pay off the debt with cheap dollars, and while that may be good for the government, it is terrible for investors.

When the government prints money, people who saved their money and people who invested in fixed income, bonds and other liquid assets get hurt badly.  In some cases they can get wiped out.

And what’s worse – this time around, the government is artificially keeping interest rates at zero until early 2015 so they can keep inflating our currency without much backlash.

Ask yourselves a few questions:

  • When was the last time you remember not being able to get any interest on money in savings accounts?
  • When was the last time you remember the 10-year treasury at below 1.5%, or corporate bonds at 3%?
  • When was the last time you remember the Federal Reserve printing $40 Billion a MONTH, without end, (which they are now doing and calling it “QE-3”)?

So how do you protect against inflation?  — WITH HARD ASSETS – and frankly, there is no better hard asset than real estate.  Unlike gold or commodities, real estate can generate current income and grow in value with inflation – it has historically been used to generate cash flow and capital appreciation, and is also considered a hedge against inflation.

We are living in unprecedented times, and these events will create risks for some, and opportunities for those who prepare.

 

Posted on by Jacob Frydman in Commercial Real Estate, United Realty Leadership Leave a comment

Foreign Investors Pour Capital into New York Commercial Real Estate Market

Real Estate Investment BankMany New Yorkers have the view that their city is the capital of the world. Recent commercial real estate trends indicate they might actually be on to something.  Investors from Russia to the Middle East are pouring capital into Big Apple real estate in record amounts.

Indeed, foreign investment in the U.S. real estate  market has been increasing for the past 12 consecutive quarters. Overall foreign investment in the U.S. is also surging.  According to the Commerce Department, the U.S. attracted $28.7 billion in foreign direct investments between January and March 2012. The investment trend has been led by Europeans seeking a safe haven from their own debt crisis and uncertainty about the Euro’s viability as a currency.  In 2011, foreign investment in the U.S. totaled $234 billion, a 14% jump over $205.8 billion in 2010. Two-thirds of that cash came from Europe.

In the real estate sector, foreign investment has about $82.5 billion in the 12-month period ending in March 2012—up about 24% from the $66 billion they spent the year before — but only 9% of all residential real estate sales come from international buyers, according to a recent report from the National Association of Realtors.

The Americas as a whole experienced a 1.5% increase in its Capital Value Index in the first quarter of 2012, while the rest of the world saw flat growth, according to the global real estate advisory firm CB Richard Ellis. That growth was concentrated in prime properties in Central Business District (CBD) areas, such as New York City. Others CBDs that saw investor focus included Washington, DC, San Francisco and Boston. Foreign investors are coming in with cash looking for assets that are tied to the value of the US Dollar in order to shelter their investments from the riskier European currencies. The New York City commercial real estate market has become an attractive investment for those foreign investors worrying more about wealth protection than income generation.

Several Real Estate Investment Trusts (REITs) and private fund offerings are attracting capital from foreign investors searching for a safe haven. That trend is expected to continue as long as yields on U.S. Treasury securities remain low and Europe continues to struggle.

Posted on by Jacob Frydman in Commercial Real Estate, Foreign Investors Leave a comment

RENT-ing is Sweet Music to Brooklyn Investors.

Real Estate NYCYou don’t need to have a Broadway hit to enjoy rent. Brooklyn is booming.

Although the American dream is still to own property, renting has taken off in the years since the Financial Crisis, especially in highly desirable neighborhoods like Brooklyn. That has caused a flurry of activity among commercial real estate investors looking to capitalize on rising rents and low financing. A recent report in the New York Times mentioned sale of 111 Kent Avenue in Brooklyn for $55.5 million, or more than $895,000 for each of 111 Kent’s 62 apartments. The NYTimes article goes on to mention that the price paid per apartment is a record for such properties outside Manhattan, according to the data company, Real Capital Analytics.

Steiner Studios recently acquired a 60-unit rental in the Carroll Gardens neighborhood of Brooklyn for $24.5 million, or $408,000 a unit, and is in contract to buy another rental building in the borough. Other big sales include Invesco Real Estate’s purchase of 75 Clinton in Brooklyn Heights for $50.8 million, or roughly $686,000 a unit. Invesco also bought the Arias Park Slope at 150 Fourth Avenue for $57.5 million, or roughly $605,000 a unit. Equity Residential bought 175 Kent Avenue in Williamsburg for $76 million, or nearly $673,000 a unit. The Naftali Group recently bought a vacant site at 267 Sixth Street in Park Slope that was intended to be a condominium and is instead building a 12-story, 104-unit rental building.

Reports point to several factors behind the trend, including a strong rental market and low interest rates. Rents in the borough increased by 10 percent in 2010 and were estimated to increase by 7 percent last year, according to a market report by TerraCRG.

Even those people who want to purchase a home are having difficulty obtaining a mortgage, according to The Times article. So they turn to renting instead. In addition to a strong rental market, Brooklyn is attracting waves of investors because of the many stalled condominium sites that are primed for conversions into rental buildings.

The Real Deal reports that studios have recently been heating up in the rental market. Previous months have shown that studios lagged behind the one and two bedroom categories for the month-to-month price change, but that is changing. Leading the way was Williamsburg with the highest monthly studio price increase.

Data from MNS shows that Boerum and Cobble Hill are listing rents that are about $100 less than last month. Although the discounts are primarily in walk-up buildings, renters looking for a hot location with a little sacrifice in luxury should hop the F/G trains and start looking. MNS reports that compared to last spring, Park Slope has achieved the highest year-on-year price increase of 33% in the borough. Two-bedrooms are up over $1,000 and new inventory, as well as rental product in condo buildings have pushed the rents up in the neighborhood.

 

Posted on by Jacob Frydman in News Leave a comment

High Expectations for Commercial Real Estate

After shunning the asset class since the Financial Crisis, retail and institutional investors are tiptoeing back into commercial real estate. A batch of recent studies suggest commercial real estate should outperform nearly every other asset class in 2012. A new survey by the Pension Real Estate Association indicates investors expect an average return of 9.3 percent this year – a 140 basis point increase from what the survey indicated three months ago. PREA surveyed a total of 22 firms in the first quarter, representing investment managers, financial advisors and researchers.

The 22 member firms surveyed expect outperformance primarily in the NCREIF Property Index (NPI). The biggest returns, according to the survey, are expected in the apartment sector, with returns in the office, retail and industrial sectors expected to come in slightly lower, but still outperform.

Investor sentiment for all four property types has risen since the beginning of the year, along with the overall market. Despite the increased bullishness for 2012, the average forecast still predicts a gradual slowing in returns through 2013 and 2014 as investment in the sector heats up.  Apartments are expected to remain the hottest sector with projected annual returns of 10.9 percent. In the other sectors, respondents expect higher income returns in 2012 compared with apartments, but lower overall capital appreciation. Respondents expect the retail and office sectors to each return 8.9 percent. Industrial buildings, at 8.4 percent, was the laggard.

Looking past this year to longer term expectations reveals a different picture. Over a five year horizon to 2016, the office sector has the highest average return forecast, with industrial coming in second. It’s important to note that there is some disagreement amongst forecasters about the best performing sector over the next five years. Over one-third of respondents see the office space as producing the highest returns while the same proportion chose the apartment sector. Almost one-quarter see industrial as the best performer through 2016.

A new report from the global accounting firm Deloitte & Touche finds that Real Estate Investment Trusts (REITs) are well-positioned to outperform the market this year due to improvement in property fundamentals and market dynamics as well as their relative advantage as an alternative asset class.

Unlike pre-recession times, growth prospects of REITs are now heavily dependent on mergers and acquisitions and driving increases in rental income, due to limited development activity, the report found. Although there is no certainty about the relative outperformance of REITs over competing asset classes, an improvement in the broader economy will be the key to sustained growth for this asset class. In the long term, REIT’s may benefit from global expansion as emerging markets implement REIT provisions within their tax codes to facilitate real estate investment activity.

It is noted within the Deloitte report that the performance of REITs have been a bright spot within the CRE industry over the past two years. Improved access to capital drove significant transaction growth and REITs were able to acquire prime properties within major markets at favorable pricing due to the overall market distress. REITs continue to outperform the major markets and are favorably positioned during this economic uncertainty. REIT owners are expected to focus on property operations, leasing and property management; as well as mergers and acquisition opportunities, in order to add value until a full-fledged economic recovery resumes.

 

Posted on by Jacob Frydman in Commercial Real Estate Leave a comment