Foreign investors push Fla.’s real estate market to a new peak

TAMPA, Fla. – Nov. 24, 2014 – Commercial real estate in Florida has heated up to the point that foreign investors and lenders are chasing deals that extend beyond their comfort zones bringing the market to a crest.

U.S. partisan politics aside, foreigners from around the world are much more comfortable having their money here rather than in their homelands where political instability is much greater. South Florida has long been a favorite repository for cash moved from Latin America and South America. However, increased competition has pushed Miami-area prices so high that foreign investors are venturing north into central Florida and Tampa Bay in search of better values and cap rates.

Foreign investors continue to prefer multifamily and hospitality properties because they are familiar with the business models and more comfortable with the tangibility of the asset.

How they invest, however, is changing. The established model is to pay all cash for the first property and leverage the income gained for the second deal. Now, they are joining with others to buy an apartment building, convert it to a condominium, and sell the units to individuals in foreign countries who agree to leave them in the rental pool run by the management company. Why? Foreign investors are more comfortable owning units than shares in an LLC. These transactions are all cash transactions from the seller's standpoint.

Foreigners are also making regular use of syndicators who scout properties, which are often in the Miami area. Syndicators provide a second benefit of using their track records to help obtain financing. Due to the fact that these syndicators have or do own property in the country already, and have an operation, bank accounts, etc., a lender is able to qualify them in a traditional way. If a borrower approaches a bank and doesn't have any assets in the states already, they know they will not be able to go outside the country to collect on any deficiency in case of a default. On top of that, they can't know if the buyer or entity is getting their funds from drugs or other illegal affairs.

Lenders are also becoming much more accommodating than in recent years. The Florida banks that survived the Great Recession are returning the market. Their loan criteria put greater weight on the sponsor's track record than the property as they seek to minimize risk and regulatory scrutiny.

Lending has also ramped up by agents and affiliates of Wall Street firms that offer commercial mortgage-backed securities. They are less worried about default risk than in the past, a feeling supported by the fact that CMBS loan delinquencies stayed under five percent for a second month in September, according Fitch Ratings.

Adding to the frenzy, lenders are arriving from places as far as Silicon Valley, all eager to participate in the next Florida boom. Like homegrown institutions, they worked through their troubled assets and want to put their money to work again. Joining them are Fannie Mae and Freddie Mac, which compete in financing of the hottest of assets, multifamily housing.

Lenders are also willing to place debt on industrial and hospitality properties, as they expect demand for warehouse space and hotel rooms to increase with economic activity. Lenders are cooler to retail and office properties due to the perceived threat of the Internet making online shopping, oversupply of properties to lease, more efficiently designed retail and office space concepts, and working from home more popular reducing demand on office space.

The other big change is the type of borrower. Traditional, stronger, more experienced buyers have moved to the sidelines as values have increased. New buyers are getting into the market, and traditional banks are not that excited to lend to them.

The newest lenders on the scene are less concerned about risk and are putting up money for acquisition, development and refinancing. They are supporting urban infill, smaller retail developments, and re-development.

The aggressiveness extends to interest-only financing, which is coming from Fannie Mae and Freddie Mac for multi-family properties. It's likely that CMBS lenders will follow in that category. Despite the unease associated with this type of loan, banks are probably going to join in.

Investment and loan activity has risen to a point that the market is susceptible to risks that can end the upcycle. Rising interest rates could push properties from positive to negative returns. Sales are occurring at prices above replacement value. Available properties are drying up as owners realize that while they could take a big profit, they have nowhere to invest the money and achieve as high a return, so they decide not to sell.

While the overbuilt stage is visible only in retrospect, there are signs it has arrived. Lenders that financed development in the early stages are pulling back. Newer banks and new developers are taking their place, and these less experienced players are more prone to failure.

Much of the money is going into multi-family construction. Anyone who has lived through a few real estate cycles knows what happens when too many projects come out of the ground at the same time. We may be approaching that time again so investors and brokers alike should take a cautious approach to their 2015 strategies.

Canadians snap up U.S. commercial real estate

TORONTO, Canada – Nov. 19, 2014 – Canadian investment in U.S. commercial real estate is on track to hit record levels this year, once Canada's second-largest pension fund closes a $2.25 billion deal to buy a landmark Manhattan property, according to data from property research firms.

Canadian pension funds and developers have been raising their investment in foreign real estate this year, primarily in the United States, as they seek alternatives to a consolidated domestic market.

The deal by Ivanhoe Cambridge – the real estate arm of Quebec's Caisse de depot et placement and Chicago-based Callahan Capital Properties – to buy the 42-story 1095 Avenue of the Americas building in Manhattan from Blackstone Group has not yet closed, two people familiar with the matter said. Caisse de depot et placement manages Quebec public and private sector pension funds and insurance funds.

A final announcement of the purchase may take weeks.

Canadians had already poured more than $8 billion into U.S. commercial real estate in the first three quarters of 2014, surpassing the $7.8 billion spent during the same period in 2013, according to Jones Lang LaSalle and Real Capital Analytics. Canadians spent $11.86 billion on U.S. commercial property in all of last year and they are on target to surpass that in 2014.

The domestic Canadian market is quite tightly held by the domestic pension funds, said Lucy Fletcher, vice president, international capital group and capital markets at Jones Lang. Very few of the assets are trading in the current market.

Canada has been the biggest foreign buyer of U.S. commercial property for the past four years, according to data from New York City-based Real Capital.

Since 2010, Canadian investors have bought $43.4 billion in commercial U.S. property – or 1,530 properties – spending four times as much as second-placed China.

The Ivanhoe deal was previously reported in the Wall Street Journal. Upon completion, it will mark the second-highest price paid for an office building in the U.S. since the 2008 sale of the General Motors building in New York for $2.8 billion.

A spokesman for Montreal-based Ivanhoe Cambridge, which has $40 billion in assets, declined to comment. The Quebec fund's other New York investments include Manhattan office towers 1211 Avenue of the Americas and 1411 Broadway.

The purchase would be the latest U.S. acquisition by Ivanhoe Cambridge with Callahan. The two formed an alliance in 2012 to expand Ivanhoe's U.S. commercial holdings.

Miami Realtors focus on foreign buyers

MIAMI – Nov. 4, 2014 – International real estate deals accounted for 29 percent of all transactions in Miami-Dade and Broward counties in the past year, comprising one of the more vibrant corners of the local economy.

But the truth is Miami real estate isn't so much bought by foreigners as it is sold to them – by a polished army of real estate agents, who strategize and network to make those sales happen.

This week, some 300 agents who focus on the foreign market have gathered at the Miami International Real Estate Congress at the Biltmore Hotel in Coral Gables.

The event – put on for the 20th year by the Miami Association of Realtors – has drawn some 70 agents from Brazil, Argentina, France, Italy, Ecuador, Colombia and the U.S. Virgin Islands, and it is abuzz with the excitement of a city that, after the painful bust of 2008, once again has a skyline full of construction cranes.

"Miami is the most international city in the entire United States," Teresa King Kinney, CEO of the Miami Association of Realtors, told the gathering. Her proof: More than half the residents in Miami-Dade were born abroad.

If Miami-Dade doesn't set another record year for residential sales in 2014, it will come close to doing so, buoyed by the strength of foreign demand, King Kinney told the meeting, which continues through Tuesday.

Despite tough economic conditions in much of Latin America and Europe, foreign buyers are continuing to invest in Miami, according to a report from the National Association of Realtors. Still, foreign sales accounted for a smaller share of sales than in 2013, when 35 percent of sales by Miami-Dade and Broward agents involved international clients.

South Florida's foreign buyers tend to be big spenders: The mean price of a residence purchased by an international buyer was $444,052. That compared with a mean of $245,000 for all Florida home sales. Brazilians had the highest mean purchase price, $494,531, while Canadians had the lowest, $310,484, the report said.

"International buyers in Miami are more upscale, the NAR study found," King Kinney said.

And that means big money for the Realtors who cater to them.

"We're probably paying some of the highest commissions in the world," Alicia Cervera La Madrid, managing partner of Miami-based Cervera Real Estate, told the crowd.

Cervera's firm specializes in sales and marketing of pre-construction condominiums and works through networks of agents locally and internationally.

Many South Florida real estate agents are multilingual or hail from a foreign country and thus understand the language and culture of their clients.

Mauricio Mohrer, a Realtor associate with Beachfront Realty Inc. in Aventura, is a Brazilian-American who travels several times a year to Brazil to nurture ties with clients and other agents there.

Mohrer said through training sessions put on by the Miami Association of Realtors, he has also polished his skills in understanding other cultures, including Asians.

While Asians currently make up a small share of buyers in Miami, many locals expect that to increase with the increased trade expected at Port Miami once the expansion of the Panama Canal is complete.

Philip Spiegelman, principal at Aventura-based International Sales Group, another big sales and marketing firm focused on pre-construction condos, said real estate brokers play a vital role in connecting foreign buyers to Miami projects.

"For the guy sitting in Caracas or Buenos Aires or Sao Paulo who doesn't need shelter but who wants to make an investment or wants a vacation home, it's our job to create that impetus," Spiegelman said.

According to the NAR study, 81 percent of South Florida's foreign buyers paid cash, and 72 percent purchased a condo or townhouse.

King Kinney said, "Cash continues to be king," even though a growing number of lenders do offer the option of mortgage financing at some level. "The assumption is Miami is a very good place to put your money," she said.

Copyright © 2014 Miami Herald, Martha Brannigan. Distributed by MCT Information Services.

Canadian snowbirds encouraged to buy a Florida home

MONTREAL, Canada – Oct. 14, 2014 – As Canadian snowbirds prepare to head south, the Annual Snowbird outlook from BMO Bank of Montreal is telling Canadians that "U.S. housing affordability remains healthy, and prices are expected to increase in Florida, Arizona and other popular areas."

The bank offers only two warnings to Canadians considering a southern move: The border crossing rules are more strict, and a strengthening U.S. dollar could make purchases in Florida and elsewhere more expensive.

"Overall, U.S. house prices have soared 20 percent in the past two years, but are only about half way back to their peak in 2006," and "Traditional destinations for Canadian Snowbirds remain affordable," the bank says. "Compared to their peaks, prices in Tampa are down 34 percent, Phoenix down 30 percent, Las Vegas off 43 percent, and Miami down a whopping 52 percent."

"Now, with the American economy and employment gaining strength, home sales should gather some momentum," advises Sal Guatieri, senior economist, BMO Capital Markets. "We expect prices to rise over time alongside growing family incomes."

Guatieri also says BMO expects "capital gains appreciation for Canadians who purchase U.S. property."

Florida a hotspot

Florida continues to be a hotspot with Canadians representing the largest foreign buyers of Florida housing, BMO says. More than 500,000 Canadians currently own real estate in Florida.

"Florida properties are a bargain compared to real estate in Canada. The median priced home in Florida is nearly half that in Canada," says Jack Ablin, chief investment officer, BMO Harris Private Bank. "Popular areas include Sarasota-Bradenton-Venice, Orlando-Kissimmee, Miami-Ft. Lauderdale-Palm Beach, Cape Coral-Ft. Myers, Tampa-St. Petersburg and Naples-Marco Island.

"We project retirement state housing prices to outpace the national average, due to increasing numbers of retirees, and abundance of capital from abroad and lower interest rates. Foreign buyers are interested in U.S. real estate because it's relatively cheap when gauged against incomes, and it's situated in a stable/safe haven economy," added Mr. Ablin.

Chinese buyers may want a ‘feng shui contingency’

SEATTLE – Oct. 6, 2014 – Wealthy Chinese buyers increasingly target U.S. real estate to invest some of their fortunes, including an upswing in Florida properties.

A quarter of all American real estate sold to foreigners last year was to Chinese buyers, who now make up the largest group of foreign buyers in the nation. In the 12 months ending in March, Chinese buyers spent $22 billion on U.S. real estate, up 72 percent from a year earlier, according to data from the National Association of Realtors®.

In Seattle, real estate professionals are adding a new term to their vocabulary: the "feng shui contingency." That's because prior to closing, some Chinese buyers request to have a feng shui master or consultant approve the house as part of a general inspection.

"We had a case where a tree was blocking the chi, or energy flow, of the home," May Wan, a real estate professional with Berkshire Hathaway Home Services in Bellevue, Wash., told The New York Times. "So it had to be taken out. They planted another one nearby."

Suburban Seattle has seen a real estate boom from a large influx of wealthy Chinese buyers. The group is a top buyer of Seattle real estate in recent years, accounting for up to one-third of million-dollar-plus home sales in certain areas. That has prompted some Seattle real estate brokerages to hire Mandarin translators and open offices in Beijing, and some builders have tweaked their construction designs to include feng shui principles.

The number of Chinese buyers heading to the U.S. is expected to grow nationwide. Sixty-four percent of China's millionaires have emigrated or plan to emigrate in the coming years, and they list the U.S. as their top destination, according to a survey by the Hurun Report, a Chinese wealth research firm.

Chinese buyers tend to pay nearly twice the national average for homes here, too. The median purchase of Chinese buyers is $523,148, and nearly three-quarters of their purchases are in cash, according to NAR data.

Source: "In Suburban Seattle, New Nests for China's Rich," The New York Times (Sept. 20, 2014)

Orlando, Tampa lead state for int’l homebuyers

ORLANDO, Fla. – Sept. 29, 2014 – Argentine Cristina Bianchi knows that a good mother-in-law doesn't overstay her welcome, but a good grandmother is around as much as possible.

"I'm retiring from a medical practice, and I'm looking for a place here in Orlando to come and spend time with my family here," said Bianchi, 65.

She is part of a growing number of international buyers throughout Florida.

Leading the state are Orlando and Tampa, which each had an 11 percent share of the state's international buyers during a 12-month period that ended in July, according to a new report by Florida Realtors. While South American buyers have dwindled, more Chinese buyers have entered the market.

Mounting international interest has helped drive up home prices, but it also means tougher competition for homebuyers who live in the area. Buyers from other countries come flush with cash and can effectively push out domestic buyers in need of mortgages.

"For sellers, that opportunity to close in 10 days with a cash buyer sounds a lot nicer than closing in 45 days" with a buyer who needs a mortgage, said Maria Quintero, an Orlando agent with Stirling Sotheby's International Realty. "Plus, sellers don't have to deal with inspections, appraisals and approvals. Obviously it hurts the domestic buyer."

Florida has long led the nation for attracting the greatest share of homebuyers from other regions of the world. During recent years, an increased number of international buyers purchased homes in the state, and those buyers have become a larger share of the Florida real-estate market, accounting for 10 percent of residential sales in the state by July of this year.

In the Orlando area, international buyers are most likely to originate from, in order: Canada, the United Kingdom, Brazil, China, Venezuela and Argentina.

Statewide, Canadian buyers dominated this year's list of international buyers. They commanded 32 percent of the international market, up from 30 percent the previous year. But looking ahead, Canadians' interest in the Sunshine State may wane now that foreclosure bargains have started to disappear and prices have begun to stabilize.

Matthew White, broker associate Sloane Realty LLC of Lake Mary, said he has represented a number of Canadian investors and sees some of them selling properties they purchased during the downturn.

"Those buyers are looking for the kind of prices we had a year ago or two years ago. And those prices don't exist anymore," he said.

Buyers from Brazil declined to about 6 percent of Florida's foreign market in mid-2014, down from 9 percent a year earlier. Florida Realtors cited an economic slowdown in Brazil as the reason. And the share of Venezuelan buyers dropped from 8 percent to 3 percent, in part due to depreciation of the Venezuelan currency, the report stated.

But the number of Chinese buyers has grown. They accounted for about 6 percent of international purchases as of July, up from less than 1 percent a few years ago. Chinese buyers are now on par with Brazilians for influencing the state's housing market.

The communities of Reunion near Kissimmee and Minto Communities' new Festival are among the developments increasingly tapping Chinese buyers for vacation rental homes.

Roger Soderstrom, broker with Sotheby's International Realty, said his brokerage is entering the China market and will open a Beijing office in October.

But Central Florida's growing population of residents from South America is to continue to draw buyers such as Bianchi. Orlando real estate is attractive as a safe haven for assets and as good market for renting vacation homes, the grandmother said.

But, she added, there's no draw like grandchildren.

Foreign buyers taking over — this time it’s Canadians in Florida

Lured mostly by cheap prices, Canadians spent $2.2-billion on Florida real estate last year, easily making them the Sunshine State’s No. 1 international buyer of real estate.

Canadians — most of them paying cash — were behind 31.6% of all international transactions, according to a report Tuesday by the National Association of Realtors for Florida.

‘‘We went down there on a holiday and prices were so damn low, I said to my wife ‘let’s buy,’’’ said Jerry Jarson, a 74-year-old retiree from Shanty Bay, Ont. The former air force officer and lawyer bought a condo two years ago in Cape Coral for US$79,900. He estimates its value has risen US$39,000 in two years.

Half of all Canadian buyers spent less than US$200,000 — about half the average sale price of a home here last month, $398,618. Only 16% of Canadians paid more than $400,000 for their Florida homes.

There’s no country that even comes close to Canada when it comes to buying, with No. 2 United Kingdom accounting for 7% of all international purchases. Canada has been number one for seven straight years, cooling on Florida real estate after a 2011 peak but rebounding since.

‘‘The increase in international home buying activity was driven by the continued recovery of the world economy and the affordability of U.S.

properties,’’ according to the report.

Anthony Soulia, a realtor in Naples, said Canadians made up about 34% of buyers in his county last year, and he had wondered whether the falling Canadian dollar would affect sales. So far, it hasn’t.

‘‘The market continues to be strong down here,’’ said Mr. Soulia, who targets Canadian buyers on his web site. ‘‘They’re a very important part of our market.’’

About 89% of Canadians pay cash; U.S. financing is said to still be difficult to come by and that shows up in the statistics, with only 8% of Canadians getting mortgage financing stateside.

Mr. Jarson said he was able to use the equity in his Canadian home to buy his condo. ‘‘We never had any money but the bank has lots,’’ he said about the line of credit on his Canadian home he was able to use to finance the purchase.

The top Florida spot went to Tampa-St. Petersburg-Clearwater, which was picked by 12% of Canadians for purchases last year. Naples had 11%, and Fort Lauderdale had 10%. Miami Beach might be getting too pricey: only 2% of Canadians bought there in 2014.

About half of Canadians bought condos; 38% bought a detached home. The survey found 40% of Canadians buying last year purchased in a resort with another 33% buying suburban property.

The majority of Canadians, 53%, plan to use their Florida home as a vacation property. Another 14% plan to rent it out for investment purposes while 17% will do both. Only 7% of Canadians bought a home for pure retirement purposes.

25% of international investors buy a home in Florida

ORLANDO, Fla. – Sept. 8, 2014 – U.S. real estate appeals to foreign buyers, and a large number of them settled on property in Florida – about 25 percent of all international U.S. home purchases to foreign buyers, according to the 2014 report "Profile of International Home Buyers in Florida."

In the 12 months that ended in June 2014, the dollar value of purchases in Florida hit $7.97 billion – a 24 percent increase over the amount spent ($6.43 billion) the year before. About one in 10 property purchases (10 percent) in the state (26,500) involved a foreign buyer, an increase from 9 percent the year before.

Two major trends drove the increase in foreign buyers: A continuing recovery of the world's economy and the affordability of U.S. properties.

U.S. and Florida residential prices remain affordable to most international homebuyers, and they buy property that, overall, costs more than the mean price paid by domestic buyers. In Florida, 76 percent of all Realtors cited less expensive property as a top reason for purchase.

Countries

Canadian buyers accounted for the largest share of international clients (32 percent), followed by:

• Western Europe: 24 percent; primarily from the United Kingdom, France and Germany

• Latin America/Caribbean: 23 percent: primarily from Brazil and Venezuela

• Asia: 10 percent; primarily from China

Florida destinations

Sales to non-resident international clients as percent of international sales:

• Orlando-Kissimmee: 11 percent

• Tampa-St. Petersburg- Clearwater: 11 percent

• Miami-Miami Beach: 10 percent

• Bradenton-Sarasota-Venice: 8 percent

• Fort Lauderdale: 8 percent

Other key findings:

• 52 percent of Florida Realtors reported international clients (national average: 28 percent)

• 19 percent of Florida Realtors with international clients reported 6 or more clients (national average: 12 percent)

• 20 percent with international clients said they accounted for 26 percent or more of their transactions (national average: 15 percent)

• 29 percent reported that their percentage of international clients increased in the last five years (national average: 20 percent)

Market success

Realtors dealing with international clients say the key to success is understanding the culture, concerns and language of potential foreign clients; reaching out through personal contacts and online tools; and assisting potential foreign buyers through the regulatory and financial process, especially for agents on the buy-side of the transaction.

According to the survey, Realtors also said that relaxing current visa restrictions on a length of stay would attract additional international clients.

© 2014 Florida Realtors®

Another Foreign Investor Mandate to Place $1 Billion in U.S. Real Estate

Given the stability and maturity of the U.S. commercial property market in 2014, global institutional money continues to flow into the United States.

The most recent example of foreign capital flowing into the U.S., LaSalle Investment Management, a leading global real estate investment manager announced today their firm has been awarded $1 billion of equity to invest in US real estate by a large European institutional investor.

The new mandate will seek direct real estate investment opportunities across all property types in primary and top secondary markets in the U.S.

"We are extremely pleased to be working with a global investor of this caliber to develop a customized investment program which fits their requirements," says Jason Kern, LaSalle Americas CEO. "We continue to see strong interest from sophisticated investors from around the globe in more customized strategies like this one targeting the US commercial real estate market.  We anticipate continued economic growth and improving real estate fundamentals over the next few years, and believe ongoing changes in demographics, technology and urbanization will provide attractive risk-adjusted investment returns across most major property types in the US."

This new mandate follows quickly on the heels of LaSalle's recent announcement that it has raised $1 billion in equity since the beginning of 2014 for Asia Pacific property investment strategies.