How are Brexit 421A & EB-5 going to impact foreign investment in the US real estate market?

December 14, 2016

Panelists discuss the impact of Brexit, 421 A and EB-5 on foreign investment in the United States, and the effects of that capital on development in gateway cities.

Transcript

James Nelson: Foreign investment has really been the saving grace. I think a lot of the domestic investors here have been kind of waiting on the sidelines at least this summer to see where things go. But all this uncertainty and Brexit, I think it's too early to tell, but New York and the other gateway cities have really become the safe haven for capital from around the world. And if you just look in New York City back in 2010, foreign investment accounted for about 15% of all the purchases on the institutional side. Now it's almost a third. So we've seen a lot of foreign appetite. The US on the whole, there is $20,000,000,000 in the first half of inflow of capital, and China gets a lot of the air time but Canada has consistently been the largest investor here - they bring in about 25% of the capital. Germany has been very active as of late, so has Korea and Australia. So that's been fantastic to see that we're having so much global appetite here in New York and other gateway cities.

Hugh Macdonnell: We think and believes that there's a strong trend that we will see of non-US capital continuing to come and want to invest in the US. A lot of it's quite targeted to a narrow group of markets, but we think that's going to continue and we think that over a sustained period of time actually will provide some underlying capital markets support. It’s also true I think that US institutional investors have slowed down in investing domestically and some of that is just simply the fact that they are at allocation, right? Real estate has performed very, very well relative to stocks and bonds. So there's some denominator-ish kind of issues that they're facing. But the non-US capital flows we think will continue over a really enduring period of time. Just because US real estate's performance relative to alternatives around the world is very, very good and projected to be so for a longer period of time.

About Kenneth Weissenberg

Kenneth Weissenberg CPA, Tax Partner in Real Estate Services, is experienced in tax saving strategies and negotiating sales and acquisitions. He represents owners of some of the most well-known real estate properties in New York City.

About Lisa Knee

Lisa Knee is a Tax Partner and National leader of the firm's Real Estate practice and the National Real Estate Private Equity Group with expertise in the hotel, real estate, financial services, aviation and restaurant sectors and is a member of AICPA, New York State Society of Certified Public Accountants and the New York State Bar Association.

Have Questions or Comments?

If you have any questions, we'd like to hear from you.

More in This Series

Fourth Annual Real Estate Private Equity Summit

Recently EisnerAmper’s Real Estate group hosted the Fourth Annual Real Estate Private Equity Summit. The event brought developers, investors, owners and operators together to discuss what’s happening on the real estate front.

What are the trends in real estate investing?

Panelists share leading trends in the industry, including the reallocation from stocks and bonds to real estate assets as well as the evolution of foreign investment and the institutional investor's development of risk.

What opportunities are in debt structure products across the capital stack?

With the economy in an active investment phase in debt and restructured products across the capital stack, panelists discuss opportunities they see, including transitional assets, different geographies, and non-traditional banking resources.

What is your outlook on New York City?

Panelists describe their outlook on New York and other gateway cities, looking across geographies, asset classes, and property types, as well as slowing job growth or just continued modest growth in general and retail and residential vacancies.

What do your future investments look like?

EisnerAmper Partner Lisa Knee asks the panel what their investors are looking for, the tools their investors are using to evaluate the market, the balance of supply and demand in real estate, and how they are planning the real estate cycle.

Bringing foreign capital to the US

Panelists discuss the process of bringing in foreign capital, the criteria that foreign investors look to in U.S. properties, and what kind of investments they are looking to make.

Are we in a correction? How long is it going to last?

EisnerAmper Real Estate Private Equity Summit panelists Kenneth Weissenberg, Jonathan Kaufman Iger, Leslie Himmel and Phil Watkins discuss whether the market is in a period of correction, and what’s ahead for vacancies and pricing.

What are the key buying and selling trends?

With a slight decrease in sales volume and a slowdown in the land market, Real Estate Services Partner Lisa Knee asks panelists to share the key buying and selling trends on the horizon, including insights on residential product.

Where are you getting your capital from? Is it more difficult today?

Real Estate Services Chair Ken Weissenberg speaks with panelists on the topic of where capital is coming from in today’s market, how accessible it is for new projects, and the reality of debt and equity chasing real estate.