NREI / March 25th, 2015
NREI reports: International investors continue to favor apartment development for US real estate. Jim Costello, Senior Vice President at global commercial real estate data and analytics firm Real Capital Analytics (RCA), stated, ”The thing that’s been skyrocketing is the Chinese purchase of development sites in the U.S.” Last September, CBRE and Savills Studley brokered a deal for the Wanda Group for 7.95 acres at 9900 Wilshire Boulevard in the premier Beverly Hills area Los Angeles. Their plan is to create a $1.2 billion condominium development.
The US economy’s recovery and lower interest rates have been huge drivers of cross-border capital. How the money comes in, however, is more complicated as sponsors and fund managers enter the mix of the now 5 percent of the total US development site purchases, according to RCA. Costello noted that the investors appear to be using a business model of acquiring land to develop condominium and rental apartment properties to sell or lease as done previously in China. “The vehicles that cross border investors have been using to access the MFH market may be part of the issue,” Costello added.
The most accurate total of cross-border capital in apartments could be larger than the billions previously recorded — $4.3 billion in apartment properties in 2014, down from $5.3 billion in 2013 according to RCA figures. AFIRE and other industry groups echo the Chinese sentiment; a recent survey of foreign investors showed that more than 90% intend to main or increase their US portfolio in 2015.