Foreign Investment in US M-F Might Slow Down in Short Term Due to Wall St. Crisis

By Anuradha Kher, Online News EditorNew York–Some of the largest financial institutions in the United States have been merged, acquired or have filed for bankruptcy in the last couple of weeks. With yesterday’s rejection of the $700 billion bailout package, concern about availability of credit, which has already been scarce, has deepened further. While multifamily deals in the US continue to take place with the help of Fannie Mae, Freddie Mac and the Department of Housing and Urban Affairs (HUD), how will the credit crisis that has ripple effects across the world impact foreign investment into the multifamily sector in the United States? Rick Sharga, senior vice president at RealtyTrac, tells MHN, “With or without the bailout package, the market conditions, including the dollar value and property prices falling, are in favor of foreign investment into the US. This is particularly true for income-generating properties such as apartments.”Sharga adds that a lot of foreign money being invested in US real estate is in the form of cash as opposed to loans and mortgages. Therefore, it is only those who are using traditional means of financing who will be affected by this financial crisis. Echoing the same sentiment is John Bittner, partner for Grant Thornton’s Corporate Advisory and Restructuring Services. He tells MHN that most foreign investors do view US assets favorably and in the real estate market due to falling prices there has been a high level of investment activity in recent months. However, because of the escalating crisis, “in the short term, there will be a decrease in the number of investments. In the long term, real estate prices will drop further and there will be more foreign investment into the US.”Bob Bach, national director, market analysis at Grubb & Ellis Company, agrees, “Short term, the credit market has almost frozen and people are waiting to see what will happen, but after the bailout package passes, markets will unfreeze and value in multifamily assets will be restored. First, of course, we have to get our house in order. The sooner we do that the lesser damage there will be to the underlying economy.”