Paul Homsey, Principal at Noonmark Capital Partners LLC, Discusses Gulf State Investors
Paul gets inside the mind of Middle Eastern real estate investors. He notes that their goals of capital appreciation and cash yield are driving them to invest in secondary and tertiary U.S. cities such as Atlanta, Dallas and Denver. Paul discusses where once Gulf State investors may have favored trophy properties, they are now zeroing in on cash yields from things like garden apartments, senior housing, hotels and order fulfillment centers.
A lot of people thought that the investors from the Middle East were just focused on gateway cities: New York, Los Angeles, Washington D.C., San Francisco and, to a great extent, that was true and the investors, for example the large sovereign wealth funds, like to go into those gateway cities.
Over the last few years a number of goals that they are looking for, not just capital appreciation but current cash yield, have become harder to get with CAP rate compression in places like New York. So, when you ask about trends I see more investment going into secondary and tertiary cities, places like Atlanta, Dallas and Denver.
A lot of investors from the Gulf, particularly the royals and the sovereign wealth funds, were looking for trophy assets. And now it’s more about not only just a good investment but getting a current cash yield, as I mentioned. So it means that they’re going into things like multi-family rental residential – garden apartments for example. Other types of residential – senior housing, student housing – are two other sectors that are attracting capital from the Gulf States. Other areas are industrial: warehousing, order fulfillment centers, logistics – again, those produce good current cash yields. Hospitality has traditionally been a strong sector but it used to be the five-star hotels, now investment is going into three- and four-star hotels, limited service hotels, Marriott Courtyards, Holiday Inn Expresses, things like that. At the luncheon they’ll obviously be real estate owner/operators, developers and they’d be interested in hearing about Middle Eastern investors, what they are looking for, how they go about it, and the types of structures they invest in.
If I could just give the audience a good sense of how to position themselves, what projects these investors are looking for, maybe they’ll learn a little something, and if they’re interested in sourcing capital from the Middle East they’ll be able to go about it in a smarter way. The mega investors, the sovereign wealth funds, whether the Qatari sovereign wealth fund, the Abu Dabi three, four, seven hundred billion dollar institutional funds. It’d be similar to seeking investment from Calpers or a big insurance company, or a Dutch pension fund. So in a lot of cases you’ll be dealing with Americans or Westerners – people who are global real estate people. When you get into the private families you’re dealing more with a local culture. A lot of people over there say look, you first have to have a relationship then we do business. So it’s more of a personal thing. I’m no expert on China but you hear that, too. The Arab Gulf, while it’s very modern – they’ve had money now for 35 years, the infrastructure is state of the art – but in many ways it’s still traditional in terms of the cultural way of doing business.
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