Deep-pocket Argentine Investors Have Much To Say About Miami CRE
I recently presented a workshop on Miami CRE investment at the Expo Real Estate Conference in Argentina. The feedback I received from Argentinean investors – which included private equity groups and high net-worth individuals – was very positive. I departed with more inquiries than I had expected due to the unfavorable Argentinean currency exchange and a healthier investment environment in Buenos Aires compared to recent times.
Although foreign investors are retreating from condominium investment in Miami, the appetite for South Florida CRE is rapidly increasing. These deep-pocket investors are not concerned about a strong dollar or worried about the impact of the Zika virus on income-producing properties if the problem persists for the long-term and discourages tourism. They are not alarmed about the slowdown in Miami’s condo market or pondering over who will become the next U.S. President. They continue to view Miami and the South Florida region as one of the best options available to diversify their investment portfolios. Specifically, they are interested in commercial real estate that can generate a lucrative return and offer financing options that avoid tying up cash.
Argentine investors remain reluctant to invest in their country, despite a newly elected pro-business administration that has scrapped foreign exchange restrictions and now advocates for the return of flee capital. They are hesitant to entrust their wealth to an economic system that could return to a leftist government and damage their long-term investments. The damage caused by the previous administration – which drove the Argentinean economy into the ground – remains fresh in their minds. To many of the investors who reached out to me about acquiring Miami CRE, a wise option is to position their capital in the stable U.S. economy by investing in a gateway city such as Miami. Most investors are familiar with the city because they own a vacation home here, visit Miami on business trips, or have friends who travel here to shop and dine in world-class venues.
Most foreign investors also perceive the Miami commercial real estate market as capable of recovering quickly in the event of a U.S. recession. The proof is in the numbers: Between January and July 2016, foreign investors have invested $1.6 billion in commercial real estate in Miami, compared with $1.1 billion during the same period in 2015 and $420.2 million in 2014, according to data provided by Real Capital Analytics. Many of these deals are in the range of $1 million to $20 million. The inventory of Miami CRE is growing tighter and cap rates are compressing rather fast. If prices become economically unfeasible, the window of opportunity to sell to foreign investors may close but, based on my experience in Argentina, foreign interest in Miami CRE remains strong and attractive.