US Real Estate Drawing Foreigners Seeking Decent Yields, They Favor Big Urban Commercial Properties

American real estate, especially large, urban commercial properties, is drawing increasing numbers of non-U.S. investors seeking high-quality assets that offer strong yields.

Real Capital Analytics Inc., said that through the first four months of this year, foreign investors spent $7.97 billion on U.S. commercial properties, a 25 percent increase, according to Bloomberg News.

Sovereign-wealth funds and other foreign interests comprise about 8.8 percent of U.S. commercial real estate deals through April, up from an average of about 8.1 percent in the past 10 years, Real Capital Analytics said Tuesday.

“We’ve seen steadily increasing demand from non-U.S. investors,” Max Swango, director of client portfolio management for Dallas-based Invesco Real Estate, which managed $52 billion of assets as of March 31, told Bloomberg. “The interest comes from all parts of Asia, Europe and the Middle East. You’ve got some relatively young, very large sovereign-wealth funds that are just starting to actively invest.”

Examples:

Families of Brazilian banking billionaire Moise Safra and Chinese real estate developer Zhang Xin paid about $1.4 billion for a 40 percent interest in New York General Motors Building;

Caisse de Depot et Placement du Quebec, Canada's biggest pension fund manager, paid about $390 million for the 47-story Wells Fargo Center tower in Seattle;

Israel's second-largest insurer, Harel Insurance Investments and Financial Services Ltd., joined a group that paid $253 million for the 57-story IDA Center, Minneapolis' tallest building; and

Singapore-based Overseas Union Enterprises Ltd. agreed to pay $367.5 million for U.S. Bank Tower in Los Angeles, the tallest building on the West Coast.