CR O S S; BorDEr CAPI TAL
INVESTORS ABROAD SHOW INTEREST IN
COMMERCIAL REAL ESTATE IN THE UNITED STATES
By Charles Keenan
Foreign investment in U.S.
commercial real estate has slowed to a trickle, as buyers
wait and prepare for a potential wave of selling in the
future.
Foreign investors had purchased about $2 billion in
commercial properties through Sept. 30 in 2009, well
below the $12 billion in 2008 and $33 billion in 2007,
according to Real Capital Analytics Inc. (RCA), a
research firm based in New York. Foreign investors are
looking for opportunistic deals, where the price is right
and the property is high-quality. Yet, they are finding
them hard to come by.
“Anyone selling into this market has to have some
reason to do it,” says Ben Thypin, a senior market ana-
lyst at RCA. “They are not trying to capture any sort
of gain or opportunity. They obviously need capital,
whether to shore up another part of their portfolio or
otherwise.”
To be sure, foreign investors are seizing select
opportunities. German investors have led the way,
representing about 40 percent of the value of proper-
ties purchased in 2009, according to RCA. Allianz, a
German-based insurer, purchased a 50 percent stake
in Boston’s One Beacon Square from Beacon Capital,
with the property valued at $508 million. DekaBank
Group’s asset management division purchased 1999 K
Street, a relatively new office building in Washington
that is fully leased, for $208 million.
locations at pricing we think is adequate,” says Mat-
thias Danne, a Deka board member and head of the
bank’s real estate activities worldwide, which has $30
billion of property assets under management, making
it the largest provider of open-ended property funds in
Germany. “We are prepared to do more if we find more
opportunities like 1999 K Street.”
As Germany represents a larger piece of the foreign
investment, buyers of years past, such as Ireland and Aus-
tralia, are now net sellers, according to research by RCA.
Similarly, the United Kingdom, which bought up $3 bil-
lion in commercial properties in 2007, had only done one
deal through Sept. 30, 2009, a $155 million joint-venture
transaction between U.K.-based Prime Commercial
Properties and Cedar Shopping Centers Inc. (NYSE:
CDR), a REIT based in Port Washington, N. Y.
“You see the consistent long-term players still doing
deals, while some of the momentum money has gone
away,” says David Oakes, chief investment officer at
Developers Diversified Realty Corp. (NYSE: DDR),
which received a substantial equity investment from
Germany’s Otto family last year.
Meanwhile, the share of foreign capital inflows from
Asian investors has increased. Asian money represented
20 percent of all foreign property investments in 2009,
up from 8 percent in 2008, according to RCA. Although
Japan had been absent in 2009 as of Sept. 30, investors
from South Korea, Hong Kong and China had stepped
in. Kumho Investment Bank, based in South Korea,
