Foreigners Who Want Portfolio Diversification Often Buy 'Stupid Deals'

Crittenden National Real Estate Conference 2016 foreign investment panel.

SAN DIEGO—From the East Coast to the West Coast, foreign investors are changing the dynamics of real estate investment . That is according to panelists at the recent Crittenden National Real Estate Conference 2016 here. And according to a few speakers, some “stupid deals” are being done. Gary H. London , president of  London Group Realty Advisors , says that foreign money comes here because the US is this “island of tranquility compared to other parts of the world,” while Andra Frazier , VP and senior area manager of Zions Bancorporation , says that “the US is the greatest place to place and make money.” London points out that “they will take a smaller return on their money because, from their perspective, anything is better than what they have gotten.” As for one key world events impacting the flow of international investment, speakers pointed to Brazil president Dilma Rousseff’s impending impeachment, among other things going on in that country. “As of this morning, you will see a lot of investment coming here from Brazil,” London said Monday morning. “There is such instability down there, environmental crisis, economic issues and no good political direction to turn. Everything is falling apart and that instability will bring lots of money here to the US.” Other countries showing interest are Spain and countries in South America aside from Brazil. “We are seeing investors from all over,” said moderator Steve Cohen , EVP of Sabadell United Bank . “Many times, foreigner investors come in and buy all cash and buy for asset preservation, but they clearly are coming here in part because they want diversification of their portfolio. Steve Anapoell,  managing partner and co-founder of BridgeForth Capital , noted that “Because of concerns with currency risks, we are now seeing offshore investors from China and elsewhere wanting to make equity investments in the US. It is about getting a minimum return of 6% or 7% on their money, but not really a residual upside.” Anapoell also talked a bit about using EB-5 , noting that the first criterion isthe ned for a safe investment and the second element is that there needs to be a reasonable likelihood that the investor will get their capital back. “Most of the money is placed from off-shore placement agents and they [foreigners] view it [the investment] as a utility deposit,” said Anapoell. One of the reasons some of the deals are viewed as “stupid deals,” according to Anapoell, is because, often times, they don’t see the best deals, but instead, see the deals that have been shopped. “They see deals that seem promising from afar but when you dig in, they aren’t great.” Cohen sees many come into places like Miami and start small. “They then branch out and build their expertise, but many of them overpay.” Check back with GlobeSt.com for more coverage from the Crittenden conference.