commercial real estate banking international investors singapore

For the Rich, Better Than Stocks & Bonds
foreign demand investment yield

World Chasing US Real Estate 25% Yield

Singaporeans, South Koreans, Israelis, and Norwegians are accelerating purchases of U.S. real estate as a growing economy and rebounding prices lure yield-hungry buyers from overseas. But since the values of land are socially generated, shouldn't society be the beneficiary? This 2013 excerpt is from Bloomberg, Jun 4.

by Hui-yong Yu & Kathleen Chu

The families of Chinese real estate developer Zhang Xin and Brazilian banking billionaire Moise Safra bought a 40 percent stake in New York’s General Motors Building for about $1.4 billion, including debt. That transaction, completed last week, values the 50-story tower near Central Park at about $3.4 billion.

International investors made $7.97 billion in U.S. commercial-property purchases this year through April, a 25 percent jump from the same time in 2012. Their $27.5 billion in deals in all of last year was almost six times the $4.7 billion low in 2009.

With deals including the tallest buildings in Los Angeles and Minneapolis, cross-border buyers are contributing to a U.S. real estate recovery that has seen prices by some measures reach new peaks. Sellers are taking advantage of the rising values and demand.

Foreigners made 8.8 percent of U.S. commercial real estate transactions in the first four months of 2013, up from an average of 8.1 percent for the previous 10 years.

International investors in search of yield are also fueling deals in markets such as the U.K., France, and Russia.

Global commercial real estate investments topped $100 billion for the first time in five years in the first quarter. New York, Washington, Atlanta, Houston, and Los Angeles ranked among the world’s top 10 cities for cross-border deals.

For all commercial-property types, the average capitalization rate, a measure of investment yield, was 6.78 percent in the first quarter. The yield on the 10-year Treasury is hovering around 2 percent.

Canada has ranked as the biggest foreign acquirer of U.S. commercial real estate since 2010. Singapore moved up to No. 2 this year, from No. 7 in 2012. Purchases by Singaporean investors, at more than $1.9 billion through April, are already twice the $957 million recorded for all of last year.

Government (of Singapore) Investment Corp, or GIC as the sovereign-wealth fund is known, had 10 percent of its assets in real estate globally in the 2012 fiscal year, and about one-third of total assets in U.S. investments of various types. The fund is prohibited from investing in its home country.

In 2006 and 2007, the Australians were the lead foreign investor. Today, Canadians are No. 1.

The U.S. is an investment target partly because it has about one-quarter of the world’s institutional-quality commercial real estate.

After the financial crisis, many foreign investors prefer buying buildings over real estate securities.

As foreign demand helps drive up prices, many investors are paying a premium for fully leased buildings, which offer predictable income streams in lieu of big potential price appreciation.

To read more

JJS: Interesting that Singapore does not allow its surplus to be reinvested into its own real estate. Is that because they don’t want the mere buying and selling (not developing or building) to drive up the prices the way that speculators here do? If it’s OK for private institutions to snap up prime properties, why doesn’t the public institution of government do it? Then government could make some money and cut taxes. Private investors would have to find some other shelter or opportunity, a true enterprise that actually produces goods and services that increase social wellbeing, in order to turn a legitimate profit -- which would be a good thing all the way around.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

Real estate makes riches and conflicts

Good Enough for Profit, Good Enough for Populace?

Chinese Localities Confront Centralists As

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