While Canadians, Europeans, and Asians continue to be the major international investors in U.S. real estate, Australians and Israelites have shown a strong interest during 2016. The Israeli invest firm of Faropoint is working with other international investors to purchase a potential of $50 million of Memphis real estate in coming months.
“The investors targeting the Southeast market specifically are looking for stable investments but at slightly higher return than something on the East or West Coast,” stated Brian Califf, who represents Faropoint Investments.
Faropoint began investing in Memphis back in 2011 as an alternative to the expensive property – and low returns – available to it in Israel. What Faropoint is finding is that other U.S. markets may have seen bigger drops in real estate values when the bubble burst but values recovered faster in other markets while Memphis is still going to see growth potential for the next few years.
By early this year, Faropoint acquired more than 500,000 square feet of office and retail space in the Mid-South area with major holdings in the 77,000-square-foot Champion Hills Office Park at 3725 Champion Hills Drive and the 55,000-square-foot Shops of Wolflake in Bartlett. In December, Faropoint bought the Orleans Place in East Memphis. With one 2,500-square-foot vacancy left in the 30,000-square-foot shopping center. Faropoint is planning an extensive renovation and rebranding for the property.
Melbourne, Australia-based Drapac Group owns numerous properties across the Memphis region. According to Max Cookes, property director for the U.S. affiliate of Drapac, Memphis is viewed as:
“Historically, Memphis was a bustling city,” “And we believe that the Downtown area is in the very early stages of the recovery, and going through a gentrification process. The local government is definitely assisting in this potential recovery, which is fantastic to see.”
Montreal, Canada-based Olymbec is another international investment firm. According to Justin Klumak, director of acquisitions and development:
“Since we began our acquisitions in Memphis five years ago, we’ve already seen prices going up and the economy grow over the last year or so."
The firm, which owns more than 5 million square feet in Memphis, operates two local offices and employs nearly 25 people in town.
There are no laws preventing foreign investors from owning as much real estate in the U.S. as they want. However, there are tax and legal considerations when investors live across the border. One thing you don't want to do is get involved with foreign laws and foreign taxes. As an example, many Americans invest as a limited liability company (LLC) or limited liability partnership (LLP). Foreign investors will also want to set up a business entity to make investments. However, Canadian tax code doesn't recognize LLCs or LLPs. Therefore, Canadians typically use a Limited Partnership for investing.
According to the Association of Foreign Investors in Real Estate (AFIRE), foreigners continue investing tens of billions in U.S. real estate. Canadians are the largest investors at more than $9 billion and prefer investing in southern states. European investors are next at $8 billion, followed by Asian investors that have brought $4.4 billion to the closing table.
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Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for seven years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. In the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.