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Recently released figures from the Association of Foreign Investors in Real Estate were heartening to a domestic real estate community worried about a drop-off in capital funding. According to AFIRE’s 16th annual survey released at the end of January (http://www.globest.com/news/1081_1081/washington/167800-1.html), New York City and Washington, DC are the two top global cities for foreign investment — the first time since the global city category was added to the survey that a US city has taken first and second spots. London had tied for second place with Washington, after dropping from its number one slot in 2006, while the District rose from No. 4 to No. 2. New York City rose one spot to the top slot, from its previous position of No. 2.

The news, though, was not much too much of a surprise to savvy insiders; after all, the conventional wisdom has been that foreign investors would shore up the dwindling liquidity in the US, thanks to the dollar’s value and overall fundamentals. AFIRE’ figures were merely confirmation of that expected trend.

Except that it isn’t happening – at least not in the volumes anticipated. According to speakers at last week’s Washington DC RealShare Conference, the flood of capital from foreign sources has been, anecdotally at least, more of a trickle. “We just haven’t seen it,” said Oliver Carr, president and CEO of Carr Properties. Right now the company is looking to raise capital for a discretionary fund, he said, and he expects foreign investment to comprise 20% to 30% of that fund.

Anthony Westreich, president of Monday Properties, said that while the firm has been approached by investors from China and the Middle East, most are still on the sidelines waiting for the market to stabilize. “Valuations are dropping, which worries them. Also, all the talk of recession needs to stop before they will jump in,” Westreich said.

“Foreign investors haven’t jumped in like we expected,” said Simon Ziff, president of Ackman-Ziff Real Estate Group. “We have been disappointed with some banks.” Ziff, though, tempers his comments with the observation that of construction loans he has seen come to market, one-third to one-half originate from foreign banks.

Not all of the speakers held a dismal view of foreign investment flows. Also a panelist at RealShare Washington DC, Andrew McAllister, executive director at Cushman & Wakefield said that he has, in fact, seen foreign banks take on more risk.

And certainly foreign buyers have been spending at least some money in the District, as well as New York. Carr pointed to the $87 million acquisition of the historic SunTrust Bank building near the White House at the end of November as an example. Ponte Gadea SL, the real estate holding arm of Spanish billionaire Amancio Ortega, paid $556 per sf for 1445 New York Ave. – in cash.

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