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