IRVINE, CA—Last week, GlobeSt.com spoke with Robert Stamm, executive managing director of Savills Studley here, about how foreign investors think when it comes to investing in US real estate. Here, we discuss with Stamm some of the potential challenges foreign investors face when acquiring real estate here, and what the future looks like as far as capital flows into the US going forward.

GlobeSt.com: What are some of the potential challenges foreign investors face when acquiring real estate in the US?

Stamm: The acquisition process in the US is highly competitive, fast and resource intensive. Foreign investors need to be comfortable completing their financial, technical and environmental due diligence while simultaneously receiving necessary internal approvals. For core deals in gateway markets, the buyer may be expected to acquire with no formal due diligence period, requiring them to spec time and capital prior to being awarded exclusivity, which can be challenging for a conservative foreign investor. All else being equal, a seller will generally want to see a significant pricing premium from an unestablished foreign investor in order to justify selecting them over a well-known and proven domestic investor. Recently, we are seeing Asian investors offering material pricing premiums and performing well during the acquisition process for large-scale, trophy properties as we saw in or recent sale of 9900 Wilshire Blvd. in Beverly Hills, CA. This large-scale, luxury residential-development project attracted bids from several international buyers, and a Chinese developer (Wanda Group) ultimately outbid the rest of the field and successfully acquired the site.

GlobeSt.com: What are your thoughts on foreign capital flows into the US going forward in the near/mid-term?

Stamm: Chinese investors have unprecedented US allocation and are actively deploying it. We anticipate them having strong year-over-year increases of capital deployment in the near/mid-term. Chinese government agencies are beginning to loosen restrictions related to outbound investment activity, recently increasing the minimum threshold at which foreign investments are subject to government oversight from $30 million to $1 billion, making foreign investment a more-efficient process for the Chinese.

One factor that may cause some investors to pull back on US investment activity is currency performance. As the US dollar becomes stronger over certain currencies, some foreign investors will have difficulty achieving their target returns due to increased hedging costs or devaluation of their local currency against the US dollar. Notwithstanding, we strongly believe the US offers foreign investors immense opportunity and expect to see the amount of foreign investment in US real estate continue to increase year-over-year in the near/mid-term.