What Makes Lenders Comfortable When Looking at Foreign Money

Crittenden National Real Estate Conference 2016 foreign investment panel.

SAN DIEGO—“We start by looking at the original investor and where they are based. The next step is to look at their credibility.” That was according to Andra Frazier , VP and senior area manager of Zions Bancorporation , when talking about how to look at foreign money that is coming in. “We look at what track record they have in the US and it always goes back to the source of money.” The challenge, Frazier said, is “how to validate that.” Frazier recently spoke on the foreign money panel at the recent Crittenden National conference here. What makes lenders comfortable, she added, is “if they have properties here already that we can cross-collateralize with.” The political factor is also a challenge, she added, noting that “Most of the families with the small deals hire consultants because don’t speak English. Steve Anapoell Esq. , managing partner and co-founder of BridgeForth Capital , brought up the importance of the money coming in lawfully but said that “there is always a lawful way to get money out of the country and it has never been an impediment. “There is always a vehicle that exists…You just have to figure it out.” Panelist Steve Cohen , EVP of Sabadell United Bank said that communication is the key. “As lenders, if a project goes bad, we could have a borrower that claims all sorts of defenses if there is miscommunication.” Anapoell added that “you are seeing a lot of securities fraud litigation now.” He explained that there are sophisticated offshore placement agents and you have to deal with the reputable people.” He added that “You have to monitor that because it is ripe for fraud. “Everybody and their brother is an immigration agent in China.” And the type of asset doesn’t matter, Anapoell added, as long as it pencils and makes sense. “Is it a project that is going to get done? Does it pencil so that at any particular point in time, there is a reasonable likelihood that the money can get returned?” And even without the ED-5 portal, there is still foreign capital across the board, added Gary H. London , president of the London Group Realty Advisors . . Foreign investment is simply across the board in terms of asset classes, he said. “ Everything is overpriced today.” He pointed out that there is a lot of Chinese money in the hotel space at the moment and when and if this economy recesses, the hotel market will be the first to crash. “You will see a fair amount of failures in those deals.” Within the next few years , London added, there will be a slowdown. “This recovery period has been so long and that is uncharacteristically long. Something will change in terms of the dynamics of the market and my concern is that a lot of these foreign investors will get caught because they are investing in the wrong things right now.”