Breaking borders: Investing in foreign lands
Some U.S. investors see potential in Asia, Europe
By Jane Wells
Reporter
CNBC
Updated: 6:48 p.m. ET April 28, 2005
With U.S. home sales still surging to record highs, some investors are beginning to ask if the easy money has already been made in the U.S. real estate market. And some of them are looking overseas for growth opportunities.
A case in point is CalPERS, the massive California Public Employees' Retirement System. It is investing in a housing development in Mexico, but most experts putting their money into foreign markets are looking to the Far East.
“Fundamentally, there’s greater growth in Southeast Asia,” said Sam Lieber, who manages the Alpine International Real Estate Investment Fund, which has tripled in size over the last nine months as investors have poured in.
Places like Hong Kong, Singapore and Japan are starting to turn the corner in terms of growth Lieber said. And the United Kingdom and Germany are good prospects to he added.
Another investor in overseas real estate is the ING Global Real Estate Fund. It has about half of its investments in overseas companies, and even its U.S. investments have a foreign exposure. The fund is very big on Europe, where manager Ritson Ferguson sees good potential for growth.
“By our estimate, only maybe 2 to 3 percent of commercial real estate is owned by public traded companies,” said Ferguson.
Canada also represents a good growth opportunity, Ferguson said, noting that Canadian REITs — essentially, securities that sell like a stock and invest in real estate directly, either through properties or mortgages — are now returning 7.8 or 7.9 percent versus the 4.8 or 4.9 percent return for U.S. REITs.
Most agree, however, that the best turnaround story is in Japan. With the Japanese economy beaten down for so long, prices are quite depressed and now at levels not seen since 1990.
And then there’s China. Richard Kiwata, an analyst at the Penguin Consulting Group, says investors should be careful and asses the potential financial risks of such an investment.
“A lot of people have rushed into China and wanted to get on a train that’s running at 110 miles an hour,” Kiwata said
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