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Study Names Hurdle Rates for Foreign Investment

WASHINGTON, DC-A new Starwood Capital study identifies ways for investors to compare foreign real estate investments against a US benchmark rate of 20%. Borrowing by foreign governments and land use controls factor heavily in the outcome.

By Mike Cleary | Updated on October 06, 2000

WASHINGTON, DC-Specific factors such as the Moody’s sovereign debt credit rating, land use controls and property rights are critical to determining if foreign real estate investments are worth pursuing, according to a new study by Starwood Capital Group and Rosen Consulting.

The study, announced at Starwood’s Global Property Forum, aims to determine what yields are appropriate for investing in foreign real estate, when real estate investors are just beginning to figure out ways to do comparisons between countries.

The study determined “hurdle” yield rates that investments must clear for them to be economic to investors. These rates ranged from 15.9% for several Western European countries to 35.4% in Russia. Several East Asian countries have estimated hurdle rates of 30 to 35%. They compare with an average yield of 20% in the United States.

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