Why Middle Eastern and Chinese investors are looking at the Americas

As global economies continue to fluctuate, investment in American real estate—hotels in particular—is coming from international forces. Investors from the Middle East and China are looking to the Americas for development opportunities, and the numbers are strong. 

During the first half of 2015, according to a CBRE report shared by World Property Journal, $11.5 billion of capital flowed out of the Middle East into direct real estate globally—surpassing the previous half-yearly high of $9.6 billion recorded in H1 2007. Total Middle East outbound investment during 2014 stood at $13.8 billion.
 
There has been a growing shift towards the Americas by Middle Eastern buyers in H1 2015. The $2.7 billion invested in the region during H1 2015 is already on track to surpass the long-term historic annual average. In addition to New York, Washington, D.C., Atlanta and Miami were included among the top 20 investment hot spots for Middle Eastern buyers in H1 2015.

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In the last year, the hospitality sector has grown in importance for global investors and continues to attract large inflows of foreign capital. Outbound investments in hotels totaled $6.8 billion in H1 2015—a major leap compared to the $1.8 billion for 2014 overall.

"For 2015 as a whole, we expect Middle Eastern capital flows into the Americas to break the $5.1 billion high mark recorded in 2007," Spencer Levy, Americas head of research for CBRE, told the site. "Due to the size and diversity of Middle Eastern capital from institutional and private sources, it is not surprising that the types and locations of assets have expanded accordingly. We expect this appetite to continue to broaden as the supply demand imbalances in the major markets and traditional asset types are not expected to abate in the near future," said 
 
The Real Deal noted that buyers from the Middle East are also looking at Miami as a prime investment spot. In February, the Abu Dhabi Investment Authority acquired the Miami Beach Edition hotel for $230 million—accounting for the majority of the $280 million Middle Easterners have sunk into South Florida real estate during the first half of this year, according to CBRE data. The previous year saw Al Faisal Holding, a private company based out of Qatar, pay $213 million for the St. Regis Bal Harbour hotel, among other smaller transactions.

Orlando is also attracting interest from Chinese investors. Insurance companies that may amass $3.32 trillion in premiums by 2020, are "seeking reliable returns as the world's second-largest economy slows and its stock markets decline," and are eyeing the Americas, the Street is reporting. 

Purchases from Chinese investors outside their country grew 11 percent to an estimated $120 billion in 2014, according to global accounting firm KPMG. High-value real estate deals in that period included the $1.95 billion purchase of New York's Waldorf Astoria hotel by insurance provider Anbang.

Chinese insurers have been allowed to invest as much as 15 percent of their assets in overseas real estate since 2012, though as of last October, they had invested only about 1 percent, KPMG said. Individuals are poised to gain more flexibility, too, with China's cabinet releasing a plan earlier this year that would allow people with at least $160,000 (1 million yuan) of financial assets and businesses to directly invest in real estate, stocks, and bonds in foreign markets, the Wall Street Journal has reported. The option would be limited to designated free-trade zones.

And as we reported earlier this week, data from the U.S. Commerce Department's Bureau of Economic Analysis show investment by Chinese entities reached $9.5 billion last year, up from $3.3 billion in 2010 and just $385 million in 2002. A report from New York-based Rhodium Group said the first half of this year saw a record $6.4 billion in investment, with more than half of the funding going toward the real estate and hospitality sectors.

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