New York real estate investors are increasingly sending their money overseas, and their favorite targets are, in descending order, Germany, Australia and Japan, according to a report to be released this week.
“It’s increasing big time,” said Dan Fasulo, managing director of research for Real Capital Analytics, which produced the report.
Mr. Fasulo said the precise amounts of money invested by specific New York City investors wouldn’t be included in the report (nor would the amount breakdown by country), since the information is proprietary. But, he said, New York investors have spent more than $50 billion on foreign commercial real estate in the past two years.
He said the credit crisis might actually be accelerating the trend. “There’s no question that this process of geographical diversification in real estate started several years ago. I think the events related to the credit crunch and the economy slowing has just sped up that process. You have your local pension fund saying, ‘Hey, I don’t want all my real estate funds in one basket.’”
This may be the first time a third party has tried to quantify the magnitude of New York cross-border and overseas real estate investment, a trend that insiders say continues to grow as the industry morphs from a traditional bricks-and-mortar business into one of highly sophisticated, numbers-oriented investment vehicles.
James Fetgatter, chief executive of the Association of Foreign Investors in Real Estate, said that there’s little question American investment overseas has expanded dramatically in the past decade, but that, as far as he knows, no one had quantified it until now.
The trend, of course, is not merely a Gotham one. Mr. Fasulo reports that investors from San Francisco, Los Angeles and New Jersey are also investing substantial amounts of money in foreign commercial real estate. Case in point: CalPERS, the mighty California Public Employees’ Retirement System pension fund, which tends to lead the way in pension market trends.
As Pensions & Investments, a trade mag, reported on Aug. 18, CalPERS is considering allowing its money managers to invest up to 20 percent of its $23.6 billion real estate fund in emerging markets real estate.
In New York City, of the 150 New York real estate investment firms surveyed by Real Capital Analytics, 59 percent have made foreign commercial real estate investments since 2007. Thirty-five percent have invested in other cities nationally.
Germany leads the list of foreign investment targets, Mr. Fasulo said, because, “Several New York firms have been involved with buying large billion dollar portfolios of apartment properties from the German government.”