Today, in a context of a maturing cycle and growing uncertainties, both geopolitically and for the global economy, foreign investors have sold more commercial real estate in the United States than they have. purchased in one quarter, for the first time since 2013.
After years of accumulating huge portfolios, they sold $ 13.4 billion worth of assets in the second quarter of 2019, according to data analytics firm Real Capital Analytics. In the same quarter, foreign investors bought $ 12.6 billion worth of real estate.
Among them are Europeans and Canadians who recently made sales, as well as some leading Chinese investors. "The price of US real estate is very high right now, and industry players think we're near the top of the market," says Matt Posthuma, a partner in the asset management division of Ropes & Gray.
The decreasing appetite of foreign investors for US real estate contrasts with their growing interest in other asset classes in the United States. Foreign fund managers still look on US assets as a haven of peace and rushed on US stocks and bonds, buying nearly $ 64 billion in June, the largest since August 2018, according to data. from the Treasury Department.
What is the difference between these assets? Compared to buildings, stocks and bonds are easier to buy and sell. In the event of a recession, landowners may also find it more difficult to find a buyer for their property.
"Someone looking over a period of three to five years may think that his investments may not be as good as they are today," says Posthuma. That's what feeds fear. "
On the commercial real estate side, some US investors are also taking a break from their deals. Overall, the volume of sales of this type of goods in the United States decreased by 9% in the first quarter of this year compared to last year and increased by only 2% in the second quarter to 127 billion dollars.
For decades, sovereign wealth funds, insurers, pension funds and family offices around the world have been seeking assets in the United States to diversify their investments and earn steady returns. Many are also attracted by the relative stability of the market, which remains active and liquid, and the vast pool of consumers.
But with the strong dollar, foreign investors who are shedding their US assets can realize foreign exchange gains with their weaker local currencies and make profits from rising prices. The strength of the dollar also means that buying a good in the United States costs them more. In addition, some of them avoid investing in flood-prone areas, as rising sea levels and increased frequency of hurricanes increase costs to reduce the risk of damage, especially in older buildings. .
Finding good deals has also become more difficult in the US as a recession and other worrying local and structural signals – including the impact of e-commerce on the traditional business sector – are looming on the ground. horizon and cast a shadow over certain types of goods.
As for the players, Ivanhoé Cambridge, the real estate subsidiary of the Caisse de depot et placement du Québec, was one of the largest foreign sellers in the second quarter. According to Real Capital, he sold goods for a total value of $ 2.2 billion. In the second quarter, the subsidiary sold, for example, two office towers in Seattle and its stake in the Ritz Plaza, a 479-unit rental property located in the heart of Manhattan.
"It's a question of hierarchy in investments, says Sylvain Fortier, head of investment and innovation at Ivanhoé Cambridge. When you reach the threshold you set at the start, do not be greedy. Look at other opportunities and recycle your money elsewhere. "
The Quebec pension fund is now focusing more on industrial real estate and less on other types of property. At the end of last year, Ivanhoé Cambridge invested in IDI Logistics, a developer and warehouse operator located in Atlanta.
In June, GLP's Singapore-based investment manager sold a US $ 18.7 billion network of industrial warehouses, totaling 11 million square meters, to Blackstone Group. This is the largest private real estate transaction ever made. GLP said it would keep a small position in the US and was still looking to expand, but did not present a schedule.
Foreign investors still interested in the US real estate market are also starting to structure their acquisitions differently.
They choose to invest through borrowing rather than equity, which is considered a safer choice if a recession approaches. They are also taking more and more minority stakes to reduce the risk of triggering an investigation by the US Foreign Investment Commission, the national security expert group that is examining foreign investment in US companies.
Last year, Congress expanded the authority of this group, known as Cfius, which blocked some transactions involving land near military installations or other sensitive assets of the US government.