Foreign Investors Heating Up Capital Markets, Real Estate Lawyer Says

Sandy Presant, chair of the Real Estate Fund Practice at Greenberg Traurig LLP, joined REIT.com for a video interview at REITWise 2016: NAREIT’s Law, Accounting and Finance Conference at the Marriott Marquis in Washington, D.C.

Presant said capital in the private real estate market is “very heated,” as foreign funds continue to be attracted to the safe haven of the United States.

“You have lots of money coming in from offshore; there’s a lot of money chasing a finite amount of real estate,” Presant said. Presant added that opportunities for public REITs to partner with private capital exist if they are “nimble.”

Meanwhile, Presant noted that the high level of commercial debt coming due in the next few years has raised concerns.

“Everybody’s worried about it. You’re seeing the creation of private debt funds to fill in the void, and we’re seeing more people dealing with Mortgage REITs,” he said.

“I think there’ll be a tremendous opportunity if you have the money to be a lender and finance that debt; there’s a lot of it out there,” Presant said.

Regarding regulatory issues, Presant said he is watching is the Foreign Investment in Real Property Tax Act (FIRPTA) exemption for foreign pension plans. Presant described the change as “very significant.”

In addition, last year’s budget agreement contains a measure that would change the procedures on how partnerships are audited for tax purposes, Presant said. He added that “nobody is sure how these rules are going to work.”

Presant said he is also paying close attention to tax reform proposals, particularly the proposed repeal of 1031 like-kind exchanges. “It would create a hugely chilling effect on the real estate market, and this is a very fragile economy, despite the great amount of activity,” he warned.