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

Is Two Really Better Than One? Fannie and Freddie Work Together to Find Out

United Realty Discusses Fannie Mae and Freddie MacIt’s barely spring, but the housing market news is starting to warm up. The recent announcement by Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA), that Fannie Mae and Freddie Mac will consolidate functions by starting a securitization firm, has the industry buzzing. This new firm would presumably cast a red hot beam on home loans as they are processed today, easing some of the government involvement in the process. It’s reconstruction on a grander, reasonable scale, and it might just work. Speaking to the National Association for Business Economics, DeMarco outlined a scenario that would be built on cooperation, sure, but more importantly, an aggressive consolidation whereby the company would have its own chief executive and board, jointly owned by Fannie and Freddie.

As the natural step, a sort of quantum leap from the pessimism of 2008, when the Federal Government bailed out numerous companies including Fannie and Freddie, the ground seems almost poised to produce a future harvest, or at best, the beginnings of a more stable and robust market. What are the broader implications? Less government should result in less strain on the U.S. Treasury (both companies have drawn nearly $190 billion to stay in business), at least in theory. Additionally, the goal is to shrink Fannie Mae and Freddie Mac down by 10 percent in the loan market for multifamily homes. According to Reuters, Fannie Mae and Freddie Mac collectively finance about two thirds of the loans in the U.S. Reuters also reported that Fannie and Freddie will aim to complete $30 billion in single-family credit guarantee business in 2013, in effect, sharing some of the risk with the private market. Transactions could include mortgage insurance or other types of debt securities. The Chicago Tribune reports that by next year, both companies will be required to reduce the less liquid portion of their portfolio of mortgages by 5 percent.

The offspring of Fannie Mae and Freddie Mac may share some of the junk DNA inherent in today’s mortgage loan guidelines, but tougher regulations and a new outlook could be enough to make this firm a successful up-start (if you could call it that). The housing turnaround – a rebound, if you’re closing watching the numbers – is poised for yet another collection of positive headlines, as the general climate moves from pessimistic to cautiously optimistic. It won’t happen today, and it certainly won’t happen tomorrow, yet the cogs of the machinery are getting pushed into motion. Springing forward, just took on a whole new meaning, especially if you’re on the right side of commercial real estate.

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

The Fiscal Cliff and Commercial Real Estate

The Fiscal Cliff, or more appropriately, the reason we are dealing with the Fiscal Cliff, will undoubtedly impact our economy in such a way that opportunities will abound in commercial real estate.

The reason Congress has been dealing with the fiscal Cliff is because our nation’s $16 trillion in debt. Worse, we have $60 trillion in unfunded government pensions, Medicare, Medicaid and Social Security obligations. In other words we are a $76 trillion debtor nation.

The Fiscal Cliff is Congress’ way of dealing with the increasing deficit necessary to service our debt, it does not address the debt itself. Our real issue is the debt itself. We can only solve our debt problem by increasing taxes or cutting our spending. Since Congress is obviously not inclined to do either, our government needs to find an alternative way of solving this problem. I believe they have.

The Federal Reserve, which historically has dealt with interest rate policy on a quarterly basis, announced in an unprecedented move that it intends to keep interest rates at the Fed discount window at 0% through early 2015. This has created an artificial cap on interest rates. At the same time, by virtue of the Fed’s QE3 policy, the Fed is effectively printing $85 billion a month—without end. Undoubtedly this devaluation of the currency will help us pay our debt off in cheap dollars. It should also have an upward pressure on interest rates. But, by virtue of the fact that interest rates remain artificially low, we will not feel the effects of this printing of money until the Fed removes its cap on interest rates.

And when that happens, watch out. Interest rates should increase dramatically. Rising interest rates will have a significant impact on commercial real estate. Rising interest rates will bring with inflation. They will also bring with them increasing rates. Properties, such as triple net lease single tenant assets which have very nominal rent increases, typically lower than CPI, will start to act and look like bonds, diminishing in value with rising interest and capitalization rates. By contrast, inflation-protected real estate, those assets with underlying leases that adjust for inflation, should be able to maintain or increase in value.

Adding to the opportunity,  we’re approaching a time when many properties can be purchased at below replacement costs, and financed at historically low interest rates. Investors are able to acquire real estate assets at below replacement cost prices, finance them with long-term low-rate financing, and protect them with inflation-protected leases will benefit from the inflationary cycle we see coming.

While the drama on Capitol Hill is certainly causing headaches for economists around the world, those in the commercial real estate industry should see opportunity amidst the frustration.

Posted on by Jacob Frydman in News, United Realty Leadership Leave a comment