Cross-border investment into North America is still in its development stages, but could prove to be one of the biggest business stories of the decade.
On this panel, NATHIC welcomes two individuals with direct connections to FDI: Brian McGowan, EVP and COO of Metro Atlanta Chamber, and Matt Sparks, SVP of luxury & corporate development at Hilton Worldwide.
One of the biggest shifts or causes for the uptick in FDI is technology. No longer do investors necessarily need to be on the ground, in a city, to know where a smart investment is.
"The barriers to free trade continue to fall globally, and prudent investors have figured out that they can balance cyclical market risk and/or expand their real estate portfolio outside of their primary trade area," Sparks said, in regard to the panel he will be part of at NATHIC.
"While this is not a new phenomenon (i.e. the significant acquisition of US real estate by the Japanese in the 1990’s), advancements in information technology have made global real estate acquisition and management much simpler, and, thus, more prolific."
No doubt, hotels and resorts have become targets for foreign investors, influenced by what they perceive as security and high or fair ROI.
"This has manifested itself in the current significant in-flow of investment capital from investors, [particularly] based in Asia Pacific and Latin American," Sparks said.
He lists three factors motivating investment:
- An effective judicial system and transparency in the capital markets make the U.S. a relatively safe investment venue.
- Valuation increases or pricing instability in many markets create the impression that U.S. real estate is comparatively underpriced or fairly priced.
- The opportunity to gain residency in the U.S. using various immigration programs (such as EB-5) provide additional value for certain investors; particularly those located in countries with political or other types of instability.
There are, however, some obstacles to FDI, specifically regulatory complexities, costs and other risks domestic investment groups don't face. "Patience, thorough due diligence, and retaining the most appropriate consultants available in the local market can all prove invaluable in successful transactions," Sparks said.
Like many U.S. cities, Atlanta is vying for foreign dollars and investment. In doing so, as Brian McGowan shares, the city, the third most visited in the U.S. only behind New York and Orlando, is doing everything it can to make itself attractive to investors and businesses alike.
Why, then, should foreign investors be impressed with Atlanta? Why Atlanta?
McGowan has three reasons:
- Georgia is one of the best states for doing business, due to low costs and low regulation. "It's business friendly," McGowan says, adding there is a lower cost of living, which is better for employees. He cites Mercedes-Benz moving its U.S. headquarters from New Jersey to Atlanta as evidence, wooed by lower costs among other reasons. GE is facing a similar decision, considering on whether to leave its current Connecticut headquarters for another city. Atlanta has been mentioned as a candidate.
- Hartsfield-Jackson Atlanta International Airport. It's the busiest airport in the world and has direct or connecting flights to everywhere on the globe. "Big companies can access the world and 80 percent of the U.S. population within a two-hour flight," McGowan said.
- Student pool. "There are 290,000 students in region," McGowan said, citing Emory University and Georgia Tech, to name two.
"All combined, companies want to be here," McGowan said.
Aside from Atlanta, companies and investors want to be in North America. "North America has always been a rock-solid place to invest," McGowan said. "The majority of FDI is here because of the rule of law, stability of government and strength of currency. But we cant sit back on our laurels and expect it to continue."
McGowan was instrumental in the development of SelectUSA, the initiative that was created through executive order and seeks to highlight the advantages the U.S. offers as a location for business and investment.
Of the program, McGowan said it’s succeeding, but still needs more funding before it can compete better with other similar programs. The approximate $15 million it currently gets is not enough, according to McGowan.
One of McGowan's focuses is to clean off the stink some associate FDI with. Some believe that foreign companies come in and strip away what's there; the word "downsize" comes to mind. "The idea of FDI is a scary thing," McGowan said. "People think of, for example, the Japanese coming in and shutting something down. It's not the case at all. When there is M&A, there is an infusion of cash that makes the company more competitive."
In time for NATHIC, McGowan will present findings from the Brookings Institution's Global Cities Initiative, a five-year project that aims to help leaders in U.S. metropolitan areas reorient their economies toward greater engagement in world markets.
NATHIC is Nov. 4-6 at the Fontainebleau Miami Beach. Click here to read the program and register for the conference.