Category: Foreign Investment

Special Incentive for Property Buyers: A Foreign Passport

When Natalia Yavorska and her husband first considered buying a holiday retreat somewhere warmer than their Ukrainian homeland, they were drawn to the Canary Islands.

A vacation to the Spanish archipelago in 2012 left them eyeing land on the southwest coast of the island of Tenerife, and while the initial attractions were the golf courses and ocean views, the deal was sealed by a special extra that came with their purchase.

“The fact that we could get a Spanish residence visa from buying real estate was very important, and that made it an easy decision,” said Ms. Yavorska, a 60-year-old former banker from a town near Kiev.

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How the Interests of EB-5 Investors and CMBS Lenders Can Sometimes Be at Odds

Situations where a property changes hands or defaults may prove tricky for situations where an EB-5 project is financed by a CMBS lender.

A notable characteristic of the real estate capital markets over the last 20 years has been the ability to access non-traditional sources of capital for both debt and equity investment in U.S. commercial real estate. One such source is the EB-5 investment/visa program. Created by Congress in 1990, the EB-5 program creates a fast track for non-U.S. citizens toward a green card in return for capital investment in qualifying U.S. domestic businesses and projects. The EB-5 program has garnered its share of controversy for possible abuses, but can also lower the cost of equity capital for a developer.

An often overlooked issue is the interplay of EB-5 financing with the requirements of a CMBS lender, where the developer, EB-5 investor and CMBS lender have objectives that are in conflict, at least initially. In particular, the EB-5 investor may seek decision-making and investment accrual rights not acceptable to CMBS lenders.

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Uncertainty Chills International Apartment Investment

After a giant year in 2018, international investment in apartments slowed early this year, according to early data.

Rising interest rates and uncertainty about the economy’s prospects slowed the pace of investment in apartment properties during the first few months of 2019.

“The deal activity in January and February was light,” says Jim Costello, senior vice president for Real Capital Analytics (RCA), a data firm based in New York City.

Lower interest rates are expected to lure some investors back to make deals later this year. And whatever course the economy takes in 2019, apartment properties are likely continue to attract buyers.

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Foreign Investors Find Trophy Assets in Unlikely U.S. Gold Mines

Foreign investors are buying up properties in Sunbelt states.

(Bloomberg)—U.S. properties in places like Denver, Phoenix, Philadelphia, and the suburbs of Atlanta have all drawn foreign investment this year as buyers look for growth outside the biggest U.S. metro areas.

Canadian investors topped the list of foreign buyers of U.S. real estate this year, as they have for a decade. Among those was Toronto-based Starlight Investments, which purchased apartment complexes in the suburbs of Atlanta and Phoenix through its U.S. fund.

“There were really only a handful of people when we first started looking at the suburbs, and that handful is now a larger number of people that are looking at those deals,” said Raj Mehta, global head of private capital and partnerships at Starlight. “We were increasingly seeing that jobs were moving from traditional Northeast and Northwest corridors into the sunbelt states.”

In the major markets of New York, San Francisco, Washington, Los Angeles, Chicago and Boston, commercial rents are already reaching record heights, and there’s less room to grow, so some foreign real estate investors are putting money into the next-best markets where they see yields rising.

Canada, China and Germany were the top foreign investors in U.S. commercial real estate this year and are making more deals outside the biggest metro areas, according to data from CBRE. The most popular second-tier markets for foreign capital this year include Dallas, California’s Inland Empire and Philadelphia.

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