Commercial Investment Real Estate September/October 2013 - Page 26

due to the Patriot Act. “All U.S. lenders
we contacted were nervous about lend-
ing on the deal since the assets in the U.S.
were not substantial … and the banks
couldn’t consider an of -shore f nancial
statement,” he explains. Eventually, his
client closed all-cash.
T e Dodd-Frank Act has also caused
banks to tighten their standards. “Banks
have informed us that they can only open
accounts for investors from Mediterra-
nean countries if they have a face-to-face
ciate with Gerchick Real Estate in Phoenix, primarily works with meeting with all the principals,” says Paul L. White, CCIM, CPM,
private investors from Alberta and British Columbia, Canada, who managing director of KW Commercial in Miami. “And if the investor
are targeting multifamily and single-family portfolios with 7 percent- has businesses that deal in f nancial markets, banks are very hesitant
plus cap rates, which aren’t available in their markets.
to open accounts for them.” Af er many months and many meetings,
O’Sullivan recently represented a Canadian buyer who purchased White found a community bank that was willing to accept scrutiny
a portfolio of three four-plexes in Phoenix with an 8 percent cap rate from regulators.
And then there’s everyone’s favorite: taxes. “For the typical agent,
for $480,000. “T e property had a few vacant units, and I helped [the
buyer] get an entity formed, identify the property, coordinate the taxation will always be a challenge,” O’Sullivan says. As soon as his
inspections, coordinate the closing, and get it transferred to a property company begins working with an inbound investor, it sets up accoun-
management company,” he explains. Gerchick Real Estate prides itself tant and lawyer referrals. And for larger investors, it of en brings in
on being a “one-stop shop” for international investors, O’Sullivan adds. a cross-border “wealth manager” who knows the tax treaties. On the
other hand, Arizona’s investment-friendly tax structure is another
Government Issues
draw for these clients, he adds.
Indeed, cross-border investors can benef t
For Ernest L. Brown IV, CCIM, execu-
tive vice president and managing director
from f nding U.S.-based advisers who can
with Newmark Grubb Knight Frank in
walk them through transactions and iden-
tify potential opportunities and challenges.
San Antonio, working with international
Since citizenship is a major driver of
investors is, fittingly, a game of risk.
investment activity, advisers should be well
“Dealing with the tax code is complicated
$ $3,163,016,030
2001
versed in the EB-5 program. (See “Foreign
and hinders the process; however, it is not
Aid,” July/August 2013 CIRE.) T is federal
unlike currency f uctuations, which can
$12,003,935,770
$
2002
program grants visas to foreign nationals
also impact returns,” he explains. “T e
$9,644,855,488
$
$9
2003
who invest a minimum of $1 million in
investment is ultimately a combination
$ $16,082,095,411
2004
projects that can create at least 10 jobs. (T e
of lower risk in the real estate and calcu-
minimum is $500,000 for projects located
lated risks when dealing with currency
$ $23,400,447,817
2005
in “target employment areas.”) T e two-
f uctuations and tax treatment.”
$ $35,233,105,034
2006
year visa can be converted into a perma-
Whether driven by citizenship, trans-
$ $47,551,920,659
2007
nent U.S. citizenship for investors and their
parency, or simply better returns, cross-
spouses and children.
border interest in U.S. commercial real
$15,087,836,599
$ $15
087 836 599
2008
“Investors see this program as an oppor-
estate continues to grow. Advisers who
$4,096,094,826
$ $4
096 0
2009
tunity to diversify assets into the U.S. mar-
can provide the knowledge and resources
$ $10,868,910,313
2010
to help international clients navigate the
ket, which is considered more stable than
inherent obstacles and opportunities are
other areas,” says Ted W. Dang, CCIM,
$ $23,962,666,765
2011
setting themselves up for repeat business
CPM, of Commonwealth Real Estate in
$ $24,447,637,542
2012
— not only from cross-border investors,
Oakland. And Holbrook notes that several
but perhaps from new domestic inves-
EB-5 investors are active in Milwaukee.
tors as well.
But federal programs and laws are also
complicating the process. For example,
Rich Rosfelder is associate editor of
Knutson’s Norwegian client had trouble
Source: Real Capital Analytics
Commercial Investment Real Estate.
wiring money and getting bank f nancing
“Global investors see the U.S. as a stable, safe haven
with the prospect for long-term appreciation,” said
Dave Liniger, chairman and co-founder of Re/Max,
in CIRE’s July/August CCIM Connections. Liniger will
offer more insights at CCIM Live! in Denver on Oct.
25. Learn more and register at live2013.ccim.com.
24
September | October | 2013
Cross-Border
Acquisitions
Commercial Investment Real Estate