The other day I read that there has been a recent and not insignificant uptick in foreign investment in the United States commercial real estate market. It appears that healthier pockets are looking to get back into what is traditionally a safe investment marketplace – US real estate. Costar Group just reported that a $200 billion Chinese sovereign fund put $1 billion into a Los Angeles private equity fund in order to buy distressed US Properties. German and Asian investors are increasing investments in US properties. Even the French are getting into the game.
Once, long ago, I worked in Britain and learned that foreigners just don’t dive sua sponte into things foreign, especially things American. They are careful, conservative and often reluctant investors. However, when they dive in, the go confidently and typically put much more down on their original real estate investment than their American counterparts – financing less and ensuring that the properties will remain cash flow positive – a novel concept. These foreign divers like to know where the bottom is before jumping in head first and, if you ask me, I think they are starting to see it.
So is this another case of Mitsubishi buying up the Rockefeller Center? Should xenophobes among us sound the claxon? I am not. In fact, I am thrilled to hear that Charlie Chan is buying up Mickey Mouse. So why is it a good sign to see our hard won American soil snapped up by foreign investors? Because we desperately need to find the bottom and by the bottom I mean we need to adjust property values and debt underwriting metrics down so that we can again get to the business of building them up. To do so, someone has to pony up and make an offer. If foreigners want to jump in and stem the bleeding, let’s let them do it. After all, I seem to remember the good ole United States jumping in once or twice to pull their fannies out of the figurative fire. So sing with me….Over here… Over here… Oh the banks are comin’…. Oh the banks are comin’… The banks are comin’ Cause it’s over over here.