CHICAGO- “It's an amazing time to be thinking about investing,” Jeffrey A. Barclay, the managing director of Goldman Sachs, told an afternoon session earlier this week at DLA Piper's 2013 Global Real Estate Summit, considering how much cross-border real estate investment has driven much of the deal activity around the world.
“Cross-border [investment] to us is human nature,” said David D. Arthur, the managing partner of North America Real Estate Investments at Brookfield Asset Management. He estimates that they have 60% of their investments in the U.S., 10% in Europe, 10% in Canada, 15% in Australia and 5% in Brazil. “I think that global investment is here to stay,” he added, and that Brazil, especially, with its rapidly expanding middle-class is “where the opportunity is.” As reported in GlobeSt.com on Monday, DLA Piper conducted a survey of nearly 200 high-ranking real estate professionals and Brazil edged out China and Australia as their top choice for foreign investment.
“The growth is not in the mature markets today,” said Peter Ballon, vice president and head of Real Estate Investments, Americas for the Canada Pension Plan Investment Board. Although he appreciates the stability provided by American investments, countries like China and Brazil “bring the certainty of growth.”
But Ballon also said that some American investors still shy away from plunging into foreign markets like Brazil. “Very few of our American peers,” such as CalPERS, “are there.”
Barbara A. Knoflach, the CEO of Germany-based SEB Asset Management AG said many in her country want investments that avoid losses rather than ensure high returns. “Even if they are boring, but that is what our clients want. We see no need to invest in emerging countries.” But Knoflach would appreciate the chance to invest more in America, but said administrative and tax burdens discourage European investors.
“FIRPTA was definitely the biggest hurdle in the past couple of years,” she said, referring to the Foreign Investment in Real Property Tax Act of 1980, under which the government taxes foreigners on gains from the disposition of U.S. property interests.
In March, President Obama proposed a reform of the FIRPTA during a speech in Miami, including treating foreign pension plans the same as tax-exempt domestic plans. Neil Jacob, another panelist and an executive vice president of the U.S. Oxford Properties Group, expressed skepticism that the proposal would make it into law. He pointed out that, regardless of the proposal's merits, many Americans will never support giving foreigners tax breaks. “I don't have the sense that there is real conviction behind it,” he said.
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
