FOREIGN INVESTMENT IN THE ATLANTA REAL ESTATE MARKET
by
OSCAR LEONARD DALTON, III
B.B.A.,
Finance, University of Texas at Austin (1980)
and
B.B.A.,
HAROLD RAYMOND DeMOSS, III
Accounting, Texas A&M University
(1979)
Submitted to the Department of Urban Studies and Planning
and the Department of Architecture
in Partial Fulfillment of the Requirements of the Degree of
Master of Science in Real Estate Development
at the
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
October, 1988
Oscar L.
Dalton, III and Harold R.
DeMoss, III,
1988
The authors hereby grant to MIT permission to reproduce and
to distribute copies of this thesis document in whole or in
part.
Signature of the Author
(/scar L. Dalton, III
Department of Urban Studies and Planning
July 29,
1988
Signature of the Author
Harold R.
DeMoss, III
Department of Architecture
July 29,
1988
Certified by_
Lawrence S. Bacow
Associate Professor, Law and Environmental Policy
Thesis Supervisor
Accepted by
Michael Wheeler
Chairman
Interdepartmental Degree Program in Real Estate Development
MASSAOkiUSETTS INSTITUTE
OF TEC1HNO.OGY
SEP 201988
0J10RARIL$
FOREIGN INVESTMENT IN THE ATLANTA REAL ESTATE MARKET
by
OSCAR L.
DALTON, III AND HAROLD R.
DeMOSS, III
Submitted to the Department of Urban Studies and Planning
and the Department of Architecture on July 29, 1988
in partial fulfillment of the requirements of the Degree of
Master of Science in Real Estate Development
ABSTRACT
Our research represents one part of a continuing joint study
by
the
National
Association of
Realtors
and
the
Massachusetts Institute of Technology Center for Real Estate
Development which explores foreign investment in U.S. real
estate.
The purpose of the research is to examine the
motives and objectives
of
foreign investors
in order to
understand their
impacts on
the U.S. real
estate markets.
Investment
activities in
six
cities were
analyzed:
Washington, D.C.,
Los Angeles, Chicago, Phoenix, Honolulu,
and Atlanta.
This thesis focuses on Atlanta, and many of
our conclusions are supplemented by the findings in the
other cities.
Central
to our research
is the question
"Do foreign
investors
in U.S. real estate differ from their American
counterparts?"
Our
significant findings
include
the
following:
Atlanta
is
a "port-of-entry" city
for many
foreign
investors; foreign investors are opportunistic in
capitalizing on real estate opportunities in the Atlanta
market, they are willing to take on development risk, and
they have geographically diversified into other Southeastern
markets; the
foreign investor is not as long-term oriented
as commonly held, and does not pay noticeable higher prices
for real
estate; the foreign investor tends to be highly
capitalized, and has evolved to resemble his domestic
counterpart;
the Japanese are cautiously approaching the
Atlanta market;
currency fluctuations and the stock market
crash had little impact on foreign investment
in real
estate;
foreign investment will provide opportunities for
the U.S.
real estate
brokerage community;
and most
importantly, foreign investment is here to stay.
In summary, we believe that the longer foreign investors are
in the United States, the more they behave like domestic
investors. The foreign influence will be felt in most large
American cities, as foreign firms expand their operations
beyond simple investments and become involved in all aspects
of the real estate industry.
Thesis supervisor: Lawrence S. Bacow
Title: Associate Professor, Law and Environmental Policy
2
ACKNOWLEDGMENTS
During the two months that were devoted to this
project, we
came in contact with numerous people who opened their doors
to us and gave of their time and energies to make this
research a meaningful effort. We wish to thank Frank Carter
and Perry Neilson, both of Homart Development,
for their
encouragement and their insight into the Atlanta market.
Bob Anderson and Tarby Bryant were able to provide us with
their knowledge and contacts within the area, which helped
to provide an efficient framework for our work.
Our
appreciation goes to
the National Association of
Realtors who sponsored this research as part of an ongoing
study of foreign investment, and to the Center for Real
Estate Development for their support during the program.
And to Professor Lawrence S. Bacow, who gave us direction
and kept us on the right path and made the effort an
enjoyable experience, here's to you.
Finally, a special thanks to our families for
with and
supporting us over the last year. It
been impossible without you.
3
putting up
would have
BIOGRAPHICAL NOTES
OSCAR L.
DALTON, III
(LENNY)
Lenny graduated from the University
May, 1980 with a B.B.A. in Finance.
in September, 1987, he
of Texas at Austin in
Prior to coming to MIT
worked for Dalton Development, which
he formed in early 1981. The company initially specialized
in developing upper-end townhome projects and completed five
such projects. Early in 1983, the company diversified into
subdivision development in exclusive Houston neighborhoods
for million dollar homes. His responsibilities over the
years
have included locating development opportunities,
conducting market studies,
overseeing design, securing
financing,
obtaining regulatory
approvals,
supervising
construction, and
handling marketing.
He is
a real estate
broker and is pursuing his CCIM designation.
HAROLD R.
DeMOSS, III
(CHIP)
Chip graduated from the Texas A&M University in December,
1979 with a B.B.A. in Accounting. He started out in 1980
with
the Houston
office of
Coopers
&
Lybrand, an
international CPA firm. While there, he was responsible for
the planning and administration of audit engagements with
clients
in
the real estate, construction
and energy
industries. In 1984, he left public
accounting to go to
work for Florida Land Company, a central Florida
land
developer, as their controller.
Later, his company was
bought by the publishing firm of Harcourt Brace Jovanovich,
Inc., and HBJ Land Company was formed to manage and market
the company's real estate holdings. As controller, he was
responsible for all financial reporting and accounting
matters
of the companies,
and was
involved with project
feasibility studies and marketing programs. He is a real
estate broker and a certified public accountant.
4
TABLE OF CONTENTS
Abstract .................................................. 2
.
Acknowledgments ..........
.
.
.
.
.
.
.
.
.
.
.
.
. 3
Biographical Notes ........................................ 4
CHAPTER 1 -
Introduction
CHAPTER 2 -
An Overview of Foreign Investment
in the United States ......................... 11
CHAPTER 3 -
The Atlanta Real Estate Markets
CHAPTER 4 -
Foreign Investment in Atlanta Real Estate
.37
CHAPTER 5 -
Profiles of Foreign Investors in
. .49
CHAPTER 6 -
Conclusions
........................................... 6
..
............
Atlanta .
................. .................
Bibliography ................ .............................
5
20
71
84
...
CHAPTER 1
INTRODUCTION
During the
past eight to ten
have entered the
years, foreign investors
U.S. real estate market
in large numbers.
Their early purchases have been concentrated in major cities
that
have traditionally
investors,
Angeles,
both
and
been
foreign
attractive to
and
Washington,
domestic.
D.C.
have
significant amounts of foreign capital.
these cities
- Los Angeles
-
institutional
New
York,
each
Los
attracted
In at least one of
foreigners now own
more than
half the office space in the central business district [63].
As
investment grade
become scarcer,
properties
in the
major cities
some observers have theorized
have
that foreign
investors will have to look to smaller, less prominent urban
centers
to satisfy
Prices will be
down,
their appetite
for U.S.
bid up in the major port
and investors
will begin
to find
property [9].
cities, yields bid
it attractive
to
invest in other parts of the country.
This thesis seeks to
foreign
contrast
D.C.,
real
estate
to New
Atlanta
York
test this hypothesis by examining
activity
City, Los
is generally
in
Atlanta,
Angeles, and
not viewed as
financial center or a gateway to
the U.S.
In
Washington,
an international
Instead, it is a
regional center, the gateway to the Southeast.
6
Georgia.
Research Obiectives
This paper
examines the Atlanta real
answer a number of basic questions:
foreign investment
attracted to the
in Atlanta?
city?
and in what locations?
How have
What is
Why are
the magnitude of
foreign investors
What product types
Do
are they buying
they behave any differently from
domestic investors and developers?
the future?
estate market to
What are their plans for
their activities changed
How do they structure their
deals?
over time?
Have they been affected
by economic conditions such as currency.fluctuations and the
stock market crash?
This thesis
investment
is part of
in U.S.
Association of
a continuing study
real estate
Realtors (the
Institute of Technology Center
sponsored by
"NAR") and
of foreign
the National
the Massachusetts
for Real Estate Development.
In 1987, the first year of the study, the researchers looked
at foreign real estate
investments in Los Angeles, Chicago,
and
This
Washington, D.C.
Phoenix are being
year, Atlanta,
analyzed and the studies
Honolulu,
and
of Los Angeles,
Chicago, and Washington, D.C. are being updated.
Methodology
Following
investment, we
Atlanta
an extensive
literature
search on
foreign
identified the individual properties
area that
were owned
by foreign
investors.
information was obtained
from governmental reports
1),
accountants, investment
brokers, attorneys,
7
in the
This
(Endnote
advisors,
developers, and
were
other individuals
knowledgeable
transactions
on
were
the
in the Atlanta
subject.
identified,
principals involved.
Each
we
Once
then
area who
the
specific
contacted
the
foreign investor interviewed was
asked to identify properties
owned, describe its entry into
the U.S. real estate market, outline the deal structures and
return
requirements, and
Atlanta and what
describe what
attracted them
their intentions were for
the future.
to
In
total, over 25 people were interviewed for this study.
Consistent
property
with
was defined
control
at
property.
least
Also
lenders held
year's study,
last
as
fifty
one where
percent
included
were
convertible debt,
a
foreign-owned
the foreign
of
the
properties
as this
interests
equity
in
where
the
foreign
represents another
form of equity investment.
Limitations
As
with
research,
study,
resulting
willingness of
that
any
from
people to
properties identified
identified.
there
time
are
limitations
constraints
disclose data.
to
and
our
the
We
are confident
as foreign-owned
are correctly
We are certain that there are transactions that
we have overlooked.
Thus, to the extent that we have erred,
we have underreported foreign investment in Atlanta.
Organization
Chapter 2 provides an overview of foreign investment in
8
the U.S. that
the
results
is based upon a review of
of
the parallel
involved in this
Atlanta,
looks at
details the
explored
foreign
presents
city has
that attract
in
Chapter
foreign investors
Chapter
The profiles of
described in
the significant
implications for
markets in the
4.
findings of
future foreign
the U.S. as a whole.
9
cities
the city of
evolved, and
5
of the properties that
foreign-owned.
investors are
the other
Chapter 3 describes
how the
comprehensive listing
as being
studies of
current real estate
characteristics
are
project.
the literature and
briefly
area.
The
to Atlanta
contains
a
we identified
three significant
Chapter 6.
Chapter 7
this thesis
investment in
and the
Atlanta and
ENDNOTE
1. There is a system in place in the U.S to track the extent
of foreign investment, not only in real property, but
also for all other types of
investments (stocks, bonds,
joint ventures, etc.).
The International Investment
Survey Act of 1976 calls
for mandatory reporting by
foreign investors in a benchmark survey that is to be
performed every five years. Administered by the Bureau
of Economic Analysis (the "BEA") of the U.S.
Department
of Commerce, the first survey took place in 1980 and the
second in
1987.
The survey is
confidential,
and
individual names and transactions
are not
revealed;
however, the nature, amount
and location (by state) of
the investments are reported.
The results of the 1987
survey
will not
be
available until
sometime in
1989.
During the interim years, the BEA statistically estimates
the aggregate dollar value of new foreign investment by
sampling
individual firms annually.
The preliminary
estimates for 1986 should be available in June of 1988.
Separate from the BEA, the Office of Trade and Investment
Analysis
(the "TIA")
in
the International
Trade
Administration of the
U.S.
Department of Commerce
collects and identifies data on an annual basis on
specific
foreign
investment transactions.
A major
portion of the data and information is derived from
public secondary sources such as newspapers, magazines,
and business and trade journals, as well as from the
public files
of Federal regulatory
agencies.
The
aggregate data totals in this report are not strictly
comparable to those in the annual report prepared by the
BEA, primarily because of the BEA's mandatory reporting
requirements which tend to provide a more comprehensive
coverage. Because of budgetary and manpower restraints,
the TIA recognizes that their data is often incomplete
and does not in any way represent the entire scope of
foreign investments. We used these reports as a starting
point
in our
research
and
verified the
listed
transactions when possible [35].
10
CHAPTER 2
IN
AN OVERVIEW OF FOREIGN INVESTMENT
THE UNITED STATES
FOREIGN INVESTMENT IN THE UNITED STATES
After decades of
States
United
wielding
faces
the world, the
buying up the rest of
invasion
an
devalued dollars.
Each
investors
foreign
of
week, newspapers
report
that another piece of the economy has been sold to a foreign
each of
investor.
For
have been
hundreds of
Who are these
deals, there
these headline-making
smaller deals that
aren't reported.
are they investing
foreign investors and why
in the U.S.?
The most
active investors
today are the
Japanese.
A
study by Kenneth Laventhol &
Co. fixed the 1987 real estate
investment level of Japanese
ventures at $12.77 billion, up
70% from 1986's $7.53 billion
the first foreigners to
here.
In
[33].
However, they were not
realize the potential of investment
fact, there have
been previous waves
of foreign
capital that have arrived on our shores.
Great Britain began the
exchange
controls
followed by
Germany.
were
lifted
in 1979.
heavy investment from the
In
the late
invested in
This
was
soon
Netherlands and West
1970's, OPEC nations
petrodollars in U.S. energy
was being
first surge of investment when
were investing
cities and Latin American money
Florida and Texas.
It was
at this
time that the Japanese began to acquire properties in Hawaii
11
and California.
Foreign
capital flows
best return for
into markets
a given level of
risk.
that provide
the
Therefore, certain
U.S. investments appear to have higher risk adjusted returns
when compared
argues
to those
in other countries.
that
this
opportunities
which
time, because
of the increased number
discontinuity
attract
Anthony Downs
generates
foreign capital
arbitrage
[28].
Over
of foreign investors
that are active in the market, any discontinuity that exists
would likely disappear, as the price of capital increases or
the yields bid down.
Foreign capital flows to the
inflows can
be broken
investments and
down into two
includes
This
broad
deposits
securities
corporate
in
stocks and
The largest
share of
are directed into portfolio
category
U.S.
of
banks,
(treasury bills,
These
categories: portfolio
direct investments.
private foreign capital inflows
investments.
U.S. in many ways.
etc.)
bonds for
and
financial
purchases
assets
of
U.S.
purchases of
U.S.
their yield
potential
(as
opposed to ownership potential.)
The
remaining share
committed to
estate.
direct
of
foreign
direct investments
According to the U.S.
investment
ownership by a
is defined
capital inflows
in U.S. industry
and real
Commerce Department, foreign
as
the
direct or
foreign entity of 10% or more
securities of an incorporated
are
indirect
of the voting
business enterprise, or a 10%
or more interest in real property [35].
12
$150 billion into the
U.S.
send an
expected to
investors are
Foreign
economy in 1988.
estimated
Three-quarters
of this (about $110 billion) will be directed into portfolio
like U.S.
investments,
securities or
Treasury
corporate
The remaining quarter ($40 billion) will be invested
bonds.
including purchases of U.S.
industries,
directly into U.S.
real estate which could total over $10 billion in 1988
[39].
FOREIGN INVESTMENT IN REAL ESTATE
How
Salomon
much U.S.
Brothers
real estate
Inc.
investment in developed
do foreign
estimates
total
real estate is just over
total value of such property [28].
of U.S. real estate is
that
investors own?
foreign
1% of the
Hence, foreign ownership
still relatively small in comparison
with the overall size of the market.
However, foreign investors have focused their purchases
upon relatively
They
have
resorts,
investors
cities.
narrow parts
purchased
and
a
containing such
mainly
few regional
have chosen
As a
of U.S. real
office
result, their
buildings,
hotels,
centers.
Foreign
shopping
mainly downtown
locations in
impact upon
properties has
estate markets.
the few
been much greater
major
markets
than the
total size of their purchases would indicate [28].
Foreigners currently own
23 million s.f.
substantial interests in over
of office space in the
Los Angeles central
business district, or over 60% of the total space available.
By
comparison,
foreigners
own approximately
13
25%
of
the
Washington,
D.C.
ownership in
central
business district,
Chicago appears to
and
foreign
comprise about 20%
of the
downtown market [63].
Many different markets are
of
offshore investors.
Foreigners
cities and other types of
downtown
properties
are
looking to
other
products as the yields on premier
are
competitive bidding.
starting to feel the impact
being
driven
Furthermore, at
the high concentration of
downward
from
least in Los Angeles,
foreign ownership has thinned the
ranks of properties available for purchase by new investors.
More and more, foreigners are
taking on development risk as
they become increasingly more
familiar with the new markets
and product types, and as existing product becomes harder to
locate.
WHY ARE FOREIGNERS INVESTING IN U.S.
REAL ESTATE?
There are numerous reasons why foreigners are attracted
to investment in the U.S.
and to real estate in particular.
These reasons include:
"Safe
considered
Haven"
by
for
Capital. The
foreign investors
to
political and economic climates in
U.S. as a safe place to
United
be
States
among the
the world.
is
safest
They see the
invest and preserve capital for the
long term.
Exchange Rate
of
the dollar
prices
of
Differentials. The decline of
relative to
other currencies
dollar-denominated
14
assets
appear
the value
has made
very
the
low.
However,
decline, are far
below the prices of
of vacant
$21,000
$300-400 for
compared to
a prime
major U.S. city [39].
property in a
similar properties in
downtown
land in
office
any dollar
For example, the price per square
Japan and Western Europe.
foot
even absent
estate prices,
U.S. real
reach
Tokyo can
downtown office
Also, the precipitous
drop of the dollar has reduced the perceived risk of further
devaluation in the dollar's value.
Lack of Good Domestic Opportunities. Foreign countries,
including Japan, the Netherlands, Germany, and England, have
investment opportunities.
few domestic real estate
scarce,
rate for
low turnover
is a
and there
Land is
investment
grade properties within foreign markets.
The
U.S.
liquidity
of countries have
a number
enjoyed by
Deficit. The large
Trade
to fund
U.S.
acquisitions.
trade
surpluses
produced tremendous
In 1987,
Japan's
current account surplus amounted to an estimated $87 billion
[91].
Portfolio Diversification. The United States provides a
much larger market than is
And due
are
to the liquidity
numerous opportunities
found in most foreign countries.
of our real estate
to
market, there
acquire different
property
types in varied locations.
Higher
superior
Yields.
The
returns relative
U.S.
to
market
many
appears to
provide
foreign markets.
The
general interest rate structures in many foreign nations are
lower than those in the United States.
15
This tends to reduce
owners of real
United States,
yields between
and
6-6.75%,
Netherlands
at Jones Lang
4-5.5%, in
average between
London
yields in
Wooten,
can often capture cash
estate
According to analysts
8-10%.
Japan
in
In the
commensurately.
all types of investments
yields on
[19].
2-3%
between
the
on U.S. investments financed
Additionally, leveraged yields
with foreign funds are available because borrowing costs are
However, these yields are subject
lower in some countries.
to exchange rate risks.
Liquidity. Due to
of the U.S.
the size
market, high
quality downtown office properties turn over more frequently
than
properties
do
properties
these
many
overseas
market exists
unique
conditions
should
Foreign
markets.
that a deep
reassured to know
investors are
for
in
to
the
investor necessitate a sale cf such real estate holdings.
Tax
Advantages. The U.S.
significant advantages
tax code
to foreign investors in
the tax treatment they would
the
recovery period
reform is
face
a
investors
home.
The
year
By
recovery
also face
Tax
1980
(FIRPTA).
U.S.
Foreign
FIRPTA
property
back
under tax
home.
serious capital
Act
(TRA)
of
Japanese
gains tax
1986
also
at
helped
U.S. real estate by repealing
Investment
had imposed
and
real estate
period
stimulate foreign interest in
the
For example,
contrast, Japanese investors
a more
Reform
some
relation to
receive at home.
for commercial
now 31.5 years.
65
still offers
onerous
16
in
Real
Property
taxes on foreign
reporting
and
Tax
Act
sellers of
withholding
requirements.
The
TRA
most
eliminated
also
investors.
to U.S.
advantages available
the
shelter
tax
This
change hurt
who were among the primary
domestic real estate syndicators
investors.
competitors to foreign
of
Additionally, tax reform
motivated many Americans to sell their properties before the
end of 1986 because of the increase in the capital gains tax
and the enactment of passive loss limitations.
Relaxed Regulations. Some foreign nations have recently
regulations on investment in
relaxed previously restrictive
other
by
countries
thus
institutions,
domestic
their
providing greater freedom to invest in the United States.
STOCK MARKET CRASH
The volatility of the stock market, demonstrated by the
October 19,
1987 crash that saw the Dow Jones index fall 508
points,
should
strengthen
pension
portfolios, according
real estate
equity's
to Real
role
Estate Research,
in
a
publication of New York-based Goldman, Sachs & Co.
During the fall
Harris &
Louis
institutions.
following the
of 1987, Cushman &
Associates
One-third of
date
overall
Arthur
reveals
no
market direction
J. Mirante
II,
study of
the interviews
October 19 stock market
to the study, comparison of
this
conducted a
Wakefield Inc. and
Japanese
were conducted
downturn.
According
data collected before and after
conclusive evidence
due
to the
Cushman &
17
of
change
stock market
in
crash.
Wakefield president
and
executive officer,
chief
Estate Investor,
not dampened
"The recent events in
the Japanese zest for
also quoted in the National
to the
alternative
riskier
Wall
Mitsui
Daiichi
of
October
Real
[57].
Real Estate Investor as saying,
looking
to
estate
real
unstable
American
stock market.
looks,
the more
solid
Street
investments appear
crash
are
properties, which
U.S.
Miller Marketing Network, was
Ken Miller, president of
investors
the stock market have
safe investment"
they recognize as a relatively
"Foreign
National Real
in the
was quoted
to the foreign buyers"
Japanese
19, several
Estate
America Real
Development,
Kumagai
have engaged
Estate
transactions in the United States.
18
real
as
an
The
estate
[24].
Since the
firms,
including
Gumi
Co.,
in real
and
estate
ENDNOTE
1. According to
Anthony Downs
of the
Brookings Institute,
to
world
the
yields across
expect
investors
foreign
U.S.
moment,
that at the
He says
eventually converge.
property yields are high. Many foreign buyers are buying
property under the assumption that the whole structure of
is too low relative to the
real estate prices
U.S.
income-earning power of
U.S.
property.
Therefore,
foreign investors expect prices to rise and are investing
in order to take advantage of the arbitrage opportunities
[45].
19
CHAPTER
3
THE ATLANTA REAL ESTATE MARKETS
the capital
Atlanta,
foothills of
and is a community made
trees and crisscrossed by freeways,
towns, cities, and
up of
suburbs.
the best
States
[67).
chief
400
executive
largest corporations declared Atlanta
officers in America's
to be
natural boundaries to
of over
survey
a
the country's
are located in the Atlanta
mild climate and no
With a
expansion,
limit
Some of
counties.
most beautiful residential areas
the
blanketed with
is
The city
northern Georgia.
located in
is
Georgia,
of
place to
business in
locate a
the United
HISTORICAL BACKGROUND
Modern-day
Atlanta began
railroad surveyor's
named Terminus, it
daughter
of the
the
obtaining
point of
at the
in 1837
a
clearing.
Originally
later became Marthasville in
honor of a
a pine
stake in
Georgia governor
railroad
who was
charter.
instrumental in
Peachtree
Street
was
originally a trail along the Chattahoochee River that linked
Terminus with the Indian trading post of Standing Peachtree.
Renamed in 1845
town
grew
center.
into
for the Western and
an
important
It became the
War, and was reduced to
Atlantic Railroad, the
railway
and
manufacturing
Confederate arsenal during the Civil
ruins after Sherman's occupation in
20
The city was rebuilt, and later became the commercial
1864.
[5].
of the Southeast
capital
THE ATLANTA ECONOMY
("MSA")
consists
square
miles.
Clayton,
Cobb,
area,
statistical
Atlanta
the
form
and Rockdale,
Douglas,
Gwinnett,
Fulton, DeKalb,
counties,
Commission
Regional
encompass 5,148
of eighteen counties that
Seven
Area
Statistical
Metropolitan
Atlanta
official
The
often
is
which
referred to as "urban Atlanta" [17].
Southeast's
and serves
economy
largest
commercial
and distribution
population
are
Florida's
Miami
million).
Charlotte,
region's
and
North Carolina
Ft.
in
Tampa
(1.9
Lauderdale
(1.2
of
cities
largest
the
as
the
is
Trailing Atlanta
center.
million),
(1.8
million),
Atlanta
2.6 million,
of
population
a
With
is the
(1.1 million)
next largest metropolitan area in the region [49].
Employment Growth:
at 4% (1987 figure),
in
1984
[49].
employment
terms
1970's, Atlanta's
exceeded the
metropolitan areas
increase
October 1987).
the same period, Atlanta ranks
21
nation's
Atlanta is number one out
(Figure 3-1).
fifteen largest
October 1982 to
the late
consistently
growth has
of percentage
growth stands
down from the post-recession peak of 8%
However, since
overall growth rate
of the
Atlanta's employment
of
in the
employment growth
In absolute
U.S. in
(from
job gains over
third behind Los Angeles and
Washington, D.C.
[ 49)].
Total Nonagricultural Employment Growth -
Atlanta Metropolitan
Statistical Area versus the United States, 1972-88P (Year-to-Year
Percentage Change. Annual Data)
(X)
10-
6 -
0 -
United
States
-2 -
'
'
-4
72
73
74
75
76
77
78
79
80
82
81
83
84
85
86
87E B&
P Salomon Brothers Inc projection.
E Salomon Brothers Inc estimate.
Sources U S. Bureau of Labor Statistics. Wharton Econometric Forecasting Associates and the Georgia
State University Economic Forecasting Center.
Figure Z-1.
Unemployment
9.0% in 1975
the
has declined
to 4.1% at the end of
1987 national
strong
in Atlanta
average
of 6.1%
employment growth,
income growth rate of 12%
1987.
[17].
Atlanta's total
from a
high of
This compares to
Buoyed by
the
annual personal
(from 1980 to 1987) also exceeded
the national average of 8% [49].
Unlike
cities
industry dominates
the city's
in
service
such as
Detroit
and
Atlanta's economy.
continued growth is its
industries.
One of the
one
keys to
diversity, particularly
Wholesale
22
Houston, no
and
retail
trade,
Atlanta's
total
largest employment
jobs
(Figure
accounts for 23% of all
of every four
3.2)
sector, accounts
[49].
jobs,
The
service
sector
and projections show that
jobs created in the next 30
the service industries [17]
for 28%
of
now
one
years will be in
[49].
Employment Concentrations - Atlanta Metropolitan Statistical Area versus the United States,
September 1987a (Emoloyment in Thousands. Annualized)
United States
Atlanta MSA
_______________ _______________
Share
Share
of Total
Sep 8 7
of Total
Sep 8 7 a
a
Employment Sector
1,377
Total
Atlanta
Atlanta
Concentration
MSA
Relative
to U.S.b
Share
of U.S.
100.0%
101,379
100.0%
1.4%
1.0
Office Intensive
* Finance. Insur. & Real Estate
* Business Services
e Legal. Memoersnip. & Misc.
255
97
102
56E
18.5%
7.1
7.4
4.1
15,158
6.530
5.017
3.611
15.0%
6.4
4.9
3.6
1.7%
1.5
2.0
1.6
1.2
1.1
1.5
1.1
Services
" Office Intensive
* Nonoffice Intensive
321
158E
164
23.3%
11 4
11.9
23.874
8.628
15.246
23.5%
8.5
15.0
1.3%
1.8
1.1
1.0
1.1
0.8
Wnolesale and Retail Trade
* Wholesale Trade
" Retail Trade
385
134
251
28.0%
9.8
18.2
23.918
5.766
18.152
23.6%
5.7
17.9
1.6%
2.3
1.4
1.2
1.7
1.0
Transportation & Pub. Utilities
* Transportation
111
71
8.0%
5.1
5.331
3.111
5.3%
3.1
2 1%
2.3
1.5
1.7
Manufacturing
192
14.0%
19.019
18.8%
1.0%
0.7
Construction
81
5.9%
4.995
4.9%
1.6%
1.2
Government
188
13.6%
16.979
16.7%
1.1%
0.8
a Annual rate for tie 12 months ending September 1987.
b The location quotient equals the ratio of the Atlanta share of total employment to the U.S. share of total employment. For example, the
relative concentration for office-intensive employment is 18.5/15.0 = 1.2.
E Salomon Brothers Inc estimate.
MSA Metropolitan Statistical Area.
Sources: U.S. Bureau of Labor Statistics, Wharton Econometnc Forecasting Associates and Salomon Brothers Inc.
Figure 3-2.
Atlanta is doing quite
of the 1970's
State
well; however, the rapid growth
and 1980's is expected to
University
Economic
slow.
Forecasting
Center
The Georgia
("Georgia
State") predicts that Atlanta's
employment growth will slow
from an average of 4.0% in 1987
to 2.6%
1989
[49].
Absolute
in 1988 and 2.8%
employment declines
23
are expected
in
in
while smaller gains compared
to recent years
are expected in trade and services sectors.
Georgia State's
some sectors,
jobs is over
gain of 36,000
forecasted 1988
two-thirds of
the 1987 gain of 53,000 and just under half of the 1983-1986
annual average
felt in
be
already
The slowdown
[49].
77,000
of
starts
of
population continues
to
industry, as
estate
real
growth can
in
announced projects slow [17].
Growth: Atlanta's
Population
as
grow,
Corporate
Research, an
increase
1987
the
by
indicated
is
consulting firm,
Atlanta
of
3.7%.
predicts
the region's estimated population growth
that almost 70% of
between 1980 and 2010 will
be from in-migration.
This will
serve to keep Atlanta's median age younger than the national
average,
will contribute
and
to
a
higher proportion
of
single-person households in the area [17].
Cobb and Gwinnett
counties, to the north
are the fastest growing areas.
Together, they accounted for
31% of the increased population in 1987 [17].
than double that of any
Gwinnett
county
nation's
County
for
the
This was more
other county in the Atlanta region.
had the
highest
fourth
straight
fastest growing
of the city,
percentage
gain of
any
and
remains
the
year,
large county
[49]
[17].
Fulton
County, with a population of 640,000, is the largest county,
followed by
DeKalb
(520,000),
(274,000) [49].
24
Cobb
(392,000),
and Gwinnett
one of only five
Transportation: Atlanta is
the
The Perimeter Highway
[49].
(1-75, 1-85, and 1-20)
intersect
highways
interstate
major
three
where
U.S.
cities in
(1-285)
encircles Atlanta and connects its communities.
Metropolitan
The
provides
("MARTA")
because
counties
Gwinnett
rail
light
participate in the MARTA
and Buckhead are
to
the
bus
service
do
not
include Cobb
or
not
to
voters
system
Authority
and
Planned extensions
communities.
Transit
Atlanta Regional
elected
there
The airport, Midtown
[49].
than Downtown that
the only markets other
are currently served by MARTA.
the nation's largest
Hartsfield International Airport,
airport in size
one of the
Atlanta to serve
important factors that enables
largest enterprise,
Corporate Research,
it the "single
The airport is the
[49].
as a national distribution center
area's
busiest airport, is
and the world's second
over 35,000
employing
firm, considers
the Atlanta consulting
most important factor in
economic growth" [17].
people.
the city's overall
serves as a regional hub
Hartsfield
for Delta and Eastern Airlines, and international service is
available
to
Europe
and
Japan.
Nonstop
flights
are
scheduled to Amsterdam, Brussels, Frankfurt, London, Munich,
Stuttgart, Shannon, Paris, Tokyo, and Zurich [49].
Atlanta
lines
that
rests at
the
connect Washington,
Cincinnati to Jacksonville.
two main
crossing of
D.C.
to
railroad
New Orleans
and
Freight deliveries from Atlanta
can reach over half of the nation in just three days [49].
25
Metropolitan Atlanta Real Estate Markets
City of Atlanta.
Figure 3-3. Source: Salonon Brothers Inc.
26
for
Prospects
economy, outstanding
a diversified
include
of life
its quality
facilities, and
strengths
major
the Future: Atlanta's
transportation
characteristics.
The
economic diversification and strong service orientation have
protect
to
served
considerations, housing
of life
quality
at $100,000
house priced
opportunities
and
costs remain
low
three bedroom
in 1986, Atlanta's
housing costs
other large metropolitan areas such
are well below those of
as Washington, D.C.
economic
With the typical
other cities.
compared to
national
to employment
addition
In
downturns.
from
region
the
($213,000) [49].
($144,000) and Boston
But a strong economy and rapid expansion has its costs.
Atlanta's
is
growth
by
traffic
and zoning battles.
Although
characterized
also
congestion, sewer moratoriums
these negative aspects
may inhibit development temporarily,
the long-term prospects for Atlanta are favorable.
THE REAL ESTATE MARKETS
Office: Atlanta
ranks as the nation's
regional malls and located
served to
have
office
centers, usually
The suburban
office market.
market.
anchored by
near affluent residential areas,
displace Downtown
Within
seventh largest
Atlanta as
these suburban
the dominant
centers,
national
developers have constructed premium quality office buildings
to
such
an
inventory has
extent
that
the
doubled to more
over the past six years [49].
27
city's
speculative
than 70 million
office
square feet
MUlnonS.F
Allanta Office Space By Seclor
December 31, 1987
Downt
n
MdtaOn
Buckteed
a0jneriand
Perimener
Golleria
Cenier
nmer
1-85
Other
Allanta Office Vacancy Rates
December 31, 1987
0j
viwd Perimeter
Center
Gallerla
ner
i-5S
Other
S.F.
Office Space Under Construction
at 12/87 and Absorption During 1987
Absorption
Unrer Cons.L
Domnton
kdtown
sudeeh CeadU~d
Gallerio
Perreter
Cerder
Other
$30
125
120
Average Quoted Office Rents
December, 1987
915
$10
=
Class
e
=
Class A
=
$5
so
Oeee1e16
Mitwei
buelieedl bawtind Perimete Irmer i-es
Gelorer
Corter
01%W
Source: Carter & Associates
Figure 3-4. Atlanta Office Market Statistics.
28
Under
Const.
generally categorized into five
Inner I-85,
areas: Midtown,
and Cumberland/Galleria (Figure
Perimeter Center, Buckhead,
each
Center
Perimeter
and
Cumberland/Galleria
3-3).
are
in Atlanta
the sub-markets
of Downtown,
Outside
surpassed Downtown in total inventory in 1987 [14].
particular
to a
catered
has
office sub-market
Each
Downtown is characterized by legal and banking
tenant base.
firms; Buckhead has a predominance of securities, investment
and
firms;
services
financial
Atlanta's corporate
hub (Figure 3-4).
Nabisco from North
of RJR
is
the relocation
With
Carolina, Atlanta now
major Fortune
500 companies with headquarters
More than 400
of the Fortune 500
some type of corporate
Center
Perimeter
and
has eight
in the area.
industrial companies have
presence in Atlanta (headquarters or
sales office) [49].
REIT-financed
rate to
growth
between 1975
with
along
and 1980
Atlanta's
a combination
1974-75; however,
30% in
employment
forced
overbuilding
a decline
helped drive the
vacancy
of steady
new
product
rate down
to 10%.
in
The low rate triggered new construction, forcing the vacancy
rate above 20% in 1985.
9.5
million s.f.
than
record
double
pace
million square
At that time, completions peaked at
the completions
In contrast,
1985's absorption
continued into
feet were
of
1987
4.5
when
were more
million s.f.
The
an astounding
5.3
absorbed; however,
the projected
slowdown in office employment growth should limit absorption
to a yearly average of 4.0 million square feet in 1988-89.
29
versus
Market Construction Completions
Metropolitan Atlanta Office
Metropolitan Atlanta Office Market Construction Completions versus
Absorption, 1978-89P (Square Footage in Millions, Annual Data)
10
ConstrucUon
V-A/
0
1978
1
7
1979
1
198
1981
1
1982
19813
1
1
1984
1985
1
1986
1987E 1988P
1986
1987E
1989P
Metropolitan Atlanta Office Vacancy Rates, 1978-89P
(7)
22
20
18
16
10
978
1979
1980
1981
1982
1983
1984
1985
E Salomon Brothers Inc estimate. P Salomon Brothers Inc projection.
Sources: Carter & Associates and Salomon Brothers Inc.
-,ure 3-5.
30
1988P 1989P
The vacancy
in
1987,
the
of
1989 when
19% by
to
drop
(Figure 3-5)
B
Class
space.
cost to
total development
divided
Retail space in
was $195
are taken
build in
a prime
[49].
the Atlanta market is
generally
categories
regional,
the
into
are
The highest price known
suburban location is about $140 p.s.f.
Retail:
rates
These
and carrying costs
land, buildout,
into account,
A space
an Atlanta office building
been paid for
When
p.s.f.
since 1983
p.s.f. for Class
currently being discounted 15-30%.
to have
and
construction
first time
for the
average $16-23
p.s.f. for
$11-15
expected to
[14].
[49]
Quoted rents
and
end
should equalize
absorption
but it is
rate hit 21.4%
of
convenience/specialty, neighborhood, community and downtown.
Atlanta.
The
developers have
does
specialty
Retail
centers
developers
unanchored centers
for the
have
have
a convenient
realized that
not compensate
strong sales
to show
malls continue
Regional
drawing power
tried
to
activity in
suffered,
and
location alone
of an
differentiate
anchor.
their
specialty tenants.
by targeting upscale
Because these retailers are in short supply and high demand,
the
developers
tenant
mix, and
unable
have been
are now
In
contrast,
the
anchored by a grocery store,
in Atlanta.
maintain the
offering generous
less attractive retailers in an
[34].
to
proper
inducements to
attempt to fill the centers
neighborhood
center,
usually
has flourished in recent years
The reason for this is primarily the number and
31
[34].
quality of competing grocers in the area
the future in
150,000 s.f.,
that a heavily-anchored community
tenants
center
neighborhood
a
from
cannot
simply
grocery store
a
because
in excess of
open air, and generally has two or more anchor
attract
can
center
The typical center is
Atlanta.
Developers feel
tenants.
hot product of
appears to be the
The community center
generate as
much
traffic as the combination of retailers found in a community
[34].
center
sparked by the $16 million
Downtown retailing has been
complex.
Peachtree Center
The recent restoration of the Healy Building added
galleria
a tri-level
Development and
the
of the
retail portion
of the
renovation
city of
redevelopment
the
to
of
Downtown
market.
Atlanta officials are
Atlanta,
Underground
Rouse
involved in
hoping
to
re-create Baltimore's Harborplace [17].
retail
The
center, is
especially
market,
the
small
specialty
somewhat overbuilt; however, occupancy
problem at major
malls, and at least one
could get closer to starting in 1988.
is not a
new regional mall
Regional mall vacancy
rates are typically less than 5%, while strip center vacancy
rates vary widely by market
(0-40%).
Targeted areas for new
regional malls are in peripheral sites - north along Georgia
400, east and west on 1-20
outside 1-285, and south side of
Atlanta [17].
Typical retail rents in the
$20-50
p.s.f.,
and for
strip
32
Atlanta area for malls are
centers
are $10-18
p.s.f.
Capitalization rates for regional centers are 5.5-6%,
[49).
typical
while 9-10% is
centers.
The smallest
10-12% range
will draw
[17].
and the high technology
12%
of Atlanta's
Atlanta, even
market in
10 million
square foot Georgia
The 1.8 million
Apparel and
Merchandise Marts,
mart now under construction combine
to make Atlanta the third
Chicago [49].
Democratic Convention
1,500 conventions and
Center, the
World Congress
only
The 1988
the hotel
city averages
visitors a year
York and
largest convention site after New
account for
Actually, conventions
hotel
trade
- business
travelers
account for 40% and group travelers account for 17.8%
Atlanta
over 43,000
has
rooms in 16 hotels.
in
242 hotels.
The
Average room occupancy was 64% in 1986.
This figure is expected to fall
3,500 rooms are
rooms
[17].
largest concentration with over 9,200
Downtown area has the
new starts
the
[49].
attention to
though the
trade in
neighborhood centers
and Convention:
Hotel
well-located strip
for well-anchored,
completed [17].
in 1987 and 1988 as another
the number of
However, as
upward trend in
slows, developers anticipate an
Expansion
opportunities exist in the
downtown World
Congress Center,
and suburban locations are
being promoted
1989.
for local group meetings [17].
Residential:
Low
interest rates and
to provide a strong housing
in-migration help
market in Atlanta.
33
Although it
is
considered
high-density
an urban
center,
development
that
is
have the
does not
Atlanta
of
characteristic
large cities where the supply of land is constrained.
are
housing
single-family
residential market
make
of
segment
strongest
the
to
combine
factors
These
short.
Here,
Auto commuting
land is plentiful, and therefore affordable.
times
most
- detached single-family houses
the
make up
[17].
about 76% of Atlanta's total housing market
The north side of Atlanta benefits most, as residential
The southern
the city.
resulting aircraft
uses and
proximity of
attract industrial
noise have tended to
homebuyers now
there is pressure
and the
the airport
limit residential development in
first-time
outward from
office and retail developments
growth follows
account for
Since
the area.
50% of
the market,
houses under $100,000.
in the market for
As a result, there is a strong demand for additional cluster
and semi-detached houses [17].
The Atlanta
exception is
from
Midtown
condominium market is overbuilt.
the high-rise projects along
to
Buckhead
where
The one
Peachtree Street
pre-sales
have
been
significant.
The rental market continues to
the continued in-migration
has become a
an
abundance
mobile singles
be strong, again due to
of new employees.
major issue, as the north side
of luxury
projects
that
and childless couples.
Affordability
of Atlanta has
cater to
Older
upwardly
complexes, in
an attempt to find a niche in the market, are shifting to an
34
who are
investors
of the
apprehensive
existing 2-3
year
conversions of
been fewer
there have
and because
supply,
from potential
the lack of funds
declining due to
year is
of units being added each
The number
emphasis on families.
apartments to condominiums.
Because of
the extensive
infrastructure,
hookups.
have
there
counties,
been
and Gwinnett
growth in Cobb
overloaded
with
problems
on sewer
including restrictions
and water
Development interest has shifted to other sections
of the north side until the problems are solved.
Industrial:
the
As
major
hub
transportation
and
distribution center for the Southeast, Atlanta has generated
a market for
business parks and flex
park developments
over
to
1-85.
occur in the area
space.
Most business
from Peachtree Corners
Warehouse/industrial
developments
are
concentrated in the southern portion around 1-285, around to
1-20
The
West, including
airport
development,
There has
area
has
the airport
become
characterized by
always been
The trend has been that
a demand
and Camp
the
the
major
Creek Parkway.
focus
new Atlanta
for bulk
for
new
Tradeport.
warehouse space.
as land prices rise, developers are
moving further out of the city
in an attempt to provide new
projects at reasonable prices [17].
With an understanding of foreign investment in general,
and a brief
look at the Atlanta real estate markets,
35
we will
now
see how
the two
combine to
Atlanta.
36
bring foreign
capital to
CHAPTER 4
FOREIGN INVESTMENT
IN ATLANTA REAL ESTATE
"International Investors in Atlanta
Just Like You and Me."
Title
of recent article in the
Atlanta Business Chronicle
The Atlanta
with
real estate market is
literally inundated
research, we
In our
foreign investment.
[89]
found that
foreign capital has played a significant role in the Atlanta
real
estate
significant
market
since
foreign
the
players
early
have
1970's.
been
the
The
most
Europeans,
Australians, and Canadians.
WHY ATLANTA?
There seem to be two
investment in Atlanta.
funds
that are
Atlanta
as
a
in
major groups that make up foreign
The first group is composed of large
other
means
of
major U.S.
Sunbelt
cities
and who
diversification.
see
Being
primarily investors and having purchased major properties in
other cities, they
are slowly expanding to
are not considered international
port-of-entry
so-called
cities.
Atlanta
the cities that
financial centers or major
ranks
high
among
these
'second-tier' cities.
The second group
is made up of
37
smaller companies that
see themselves as niche players who want to
a way of avoiding fiercer competition in
Several companies mentioned not
Crows
and Trammell
Hines
as
the bigger markets.
world.
These
companies
projects, and are active in
of these groups
see examples of both
We will
development.
Atlanta
wanting to compete with the
of the
tended to specialize in smaller
be in
in Chapter 5.
Europeans, Atlanta's
For the
the eastern
location in
time zone allows for ease of communication with their parent
companies
proximity to
hours.
office
during
Additionally,
other Southeastern markets such
Memphis, Charlotte,
Atlanta a perfect
Atlanta's
as Nashville,
Tampa makes
Jacksonville, Orlando, and
diversify into other
point from which to
Sunbelt cities.
Hartsfield International Airport is
The convenience of
a primary
motivating
factor.
Marteen
Kuik
of
Euram
Resources, a Dutch developer explains [123]:
"Before there was nonstop service to Amsterdam,
coming to Atlanta was very aggravating. Europeans
were required to stop over at Kennedy and go
through customs with the masses of people. It was
like a zoo."
foreign
Now,
conveniently fly
from
investors
all
over
nonstop into Atlanta.
The
the
globe
can
connections to
other U.S. cities make it that much better.
A
significant number
attracted
by Atlanta's
of foreign
companies have
strategic location,
assets, and other quality of life attributes.
38
been
transportation
Kuik relates:
battle to become the capital
"Atlanta has won the
the potential
is
There
the Southeast.
of
for
tremendous growth here."
President of
Boyd Simpson,
Australia adds
Hooker of
L.J.
[131]:
"Atlanta conveys a welcome feeling to foreigners.
It has the attitude that it wants to help, rather
than put up barriers."
in
invested
1,057
This
Atlanta.
operations.
The
employment at
foreign banks
[44].
international
55,000.
doing business
offices are
Therefore,
Atlanta
that acts
it
in
manufacturing
250
cultural
community
of
and non-manufacturing
total manufacturing
tourist, and
countries
some
includes
foreign companies is over
approximately 30
Trade,
statewide, much
facilities
number
$4.3 billion
have over
countries currently
Forty-one
as
foreigners who want to establish a U.S.
There are
in Atlanta.
operated by
has
a
a
15
strong
magnet to
other
presence.
NATIONALITY AND BUSINESS ACTIVITY
Foreign investors have been
significant players in the
since the early seventies.
Atlanta real estate market
Over
this time, they have diversified into many different product
types, scattered throughout the city.
their
U.S.
headquarters
American personnel.
vertically
in
Many have established
Atlanta and
are
staffed
by
And some of these foreign companies are
integrated
into
construction,
39
brokerage
and
property management.
Atlanta,
it
we found
investor
foreign
a
differentiate
In
from
to
difficult
his
domestic
counterpart.
the most
Presently,
and Australia.
Kingdom, West Germany, Canada,
investors from
Belgium,
Austria,
(the
They have
past year and
Sweden,
Singapore, South
Aside from one purchase 10 years
are just making
the Japanese
Equitable Building),
it to Atlanta.
Also present
France, Switzerland,
India, Greece,
Spain, Portugal,
Africa, and Saudi Arabia .
ago
the
are from The Netherlands, United
Atlanta real estate market
are
investors in
active foreign
been studying the market over the
are just starting to "put their
chips on the
table."
The
pension
foreign
investors
in
funds,
insurance
companies,
conglomerates, fund
are
Atlanta
composed
publicly
advisors and intermediaries,
wealthy individuals.
Many of them
take an active
of
traded
banks and
role in
their real estate while others are passive.
It is
difficult to generalize about
any one of
these investor types or
there is
no such
thing as
there is
no such thing as
the activities of
nationalities.
a "typical"
Just as
domestic investor,
a typical foreign investor
or a
typical deal.
TYPES
OF
PROPERTY,
GEOGRAPHIC
DIVERSITY,
AND
VERTICAL
INTEGRATION
The property types that
foreign investors are involved
40
in
are as
investing.
the
market
as
diverse
In
fact, it is
in
which
significant presence.
office
the countries
building,
difficult to find a
foreign
investors
Foreign influences
business
and industrial
the
are doing
that
do
segment of
not
have
are felt
park,
in the
shopping
center, regional mall, hotel and residential sectors.
TABLE
-1.
ATLANTA oFFICE PROPERTIES INVOLVING FOREIGN INVESTORS
FOREIGN ENTITY
VG
HEERY/BALFOUR BEATTY
ASAHI MUTUAL LIFE
WILMA EOU-THEAST
DU'TCH INSTITUTIONAL H.C.
NORD
TRIZEC
LAING PROPERTIES
DUTCH INSTITUTIONAL H.C.
LAING PROPERTIES
LINDHOM
CONFIDENTIAL
ALZOUMAN, SALCH
SKANSKA
VIB
HISTORIC URBAN EDUITIES
MARK III
EURAM
STAAL BANK
CONFIDENTIAL
CONFIDENTIAL
TAYLOR WOODROW
LAING PROPERTIES
LEHNDORFF MANAGEMENT
CAPCOUNT AMERICA
HISTORIC URBAN EDUITIES
MARK III
CONFIDENTIAL
HISTORIC URBAN EQUITIES
POOL-GARANT
NORO
NATIONALITY
WEST GERMANY
UNITED KINGDOM
JAPAN
NETHERLANDS
NETHERLANDS
NETHERLANDS
CANADA
UNITED KINGDOM
NETHERLANDS
UNITED KINGDOM
UNITED KINGDOM
SWEDEN
KUWAIT
SWEDEN
NETHERLANDS
CANADA
WEST GERMANY
NETHERLANDS
NETHERLANDS
CONFIDENTIAL
WEST GERMANY
UNITED KINGDOM
UNITED KINGDOM
WEST GERMANY
UNITED KINGDOM
CANADA
WEST GERMANY
CONFIDENTIAL
CANADA
NETHERLANDS
NETHERLANDS
DESCRIPTION
FIRST ATLANTA TOWER
999 PEACHTREE
EgUITABLE BLGD.
RIVEREDGE SUMMIT
BALLERIA 200
SALLERIA 100
PEACHTREE CENTER TOWER
LENNOX TOWERS
PALLISADES
"
CDASTAL STATES
*
ATLANTA CENTER
CORPOREX CENTER
2100 RIVEREDGE
NBG BLDG.
BLENRIDGE CENTRE
HEALY BLDG.
LOCATION
DOWNTOWN
MIDTOWN
DOWNTOWN
CUMB/GALL.
CUMB/GALL.
CUMB/GALL.
DOWNTOWN
BUCKHEAD
N. CENTRAL
SIZE
900,000
610,000
590,300
465,000
435,000
410,000
403,200
369,000
364,000
DOWNTOWN
337,000 SF
DOWNTOWN
N. WEST
CUMB/GALL.
N. WEST
PERIMETER CT
DOWNTOWN
307,000
305,000
255,000
235,800
233,000
200,000
SF
SF
SF
SF
SF
SF
1275 PEACHTREE
RIVEREDGE ONE
21 EDGEWOOD AYE.
INTERCHANGE
ANCHOR BANK
CRESCENT
WILLIAM OLIVER
1765-THE EXCHANGE
ROYAL PHOENIX
FLATIRON BLDG.
3146 NE EXPRESSWAY
NATIONAL DATA
MIDTOWN
CUMB/GALL.
DOWNTOWN
PERIMETER CT
DOWNTOWN
N.EAST
DOWNTOWN
PERIMETER CT
AIRPORT
DOWNTOWN
INNER 1-85
N. EAST
144,000
128,000
126,500
118,000
118,000
115,700
102,000
89,000
70,000
42,000
33,000
91,200
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF~
SF
7,576,700 SF
This list is not intended to represent all properties with foreign involvement, and the
information contained herein may contain inaccuracies.
41
a
Table
4-1
shows
10
that
to
amounting
buildings
approximately 3,116,000 s.f. of the 11,992,000 s.f.
[14]
of
office space in Downtown Atlanta are owned either wholly, or
This amounts to over 25% of
in part, by foreign investors.
the total space.
few
Japanese reportedly looking at a
With the
1 million
with over
major projects
each,
this
story.
But,
s.f.
number could change drastically in a short time.
In many
is
Atlanta
cities this
a
would be
with no
city
size
that are spread throughout the
Downtown market.
foreign real estate investment
foreign
has forced
This fact
most
into the sub-markets outside
Our research found over 150 properties
of Downtown Atlanta.
with
market
office
sub-markets are actually comparable in
Many of these
to the
Its
center.
consists of many sub-markets
city.
the whole
involvement,
and
only
12
properties
were
located Downtown.
There
is
much
foreign involvement
industrial parks
(Table 4-2).
company, and The
Noro Group, a Dutch fund
major
players
in
this
in
business
Laing Properties,
segment.
A
and
a British
advisor, are the
major
joint
venture
between a Dutch company and two Japanese firms is building a
free
trade zone
business park
Atlanta.
42
near the
airport in
south
TAELE 4-2.
ATLANTA BUSINESS PARK PROFERTiES INVOLVING FOREISN INVESTORS
FOREIGN ENTITY
NORO
NORD
LAING PROPERTIES
LAING PROPERTIES
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
SEEFRIED PROPERTIES
WILMA SOUTHEAST
EURAM
POOL-GARANT
SEEFRIED PROPERTIES
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
SEFRI
NATIONALITY
NETHERLANDS
NETHERLANDS
UNITED KINGDOM
UNITED KINGDOM
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
AUSTRIA
NETHERLANDS
NETHERLANDS
NETHERLANDS
AUSTRIA
SINGAPORE
CONFIDENTIAL
SINGAPORE
NETHERLANDS
DESCRIPTION
6 OFFICE WAREHOUSES
NEWMARKET BUS. PARK
NEWMARKET BUS. CTR.
LAKESIDE CENTRE
COLONY CENTER BUS. PARK
COBB CORPORATE CTR.
ROYAL PHOENIX
SULLIVAN ROAD
ATLANTA TRADEPORT
SNAPFINGER TECH CTR.
LOCATION
VARIOUS
N.WEST
N.WEST
N.WEST
N. EAST
COBB CO.
AIRPORT
SOUTH
AIRPORT
EAST 1-20
OFFICE PARK
AIRWAY BUSINESS CTR.
OFFICE PARK
ATLANTA IND. PARK
S. DEKALB
AIRPORT
S. DEKALB
SOUTH
SIZE
1,200,000
825,000
600,000
313,000
224,000
196,000
150,000
125,000
123,300
112,000
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
60,000
60,000
50,000
36,000
SF
SF
SF
SF
4,074,300 SF
This list is not intended to represent all properties with foreign involvement, and the
information contained herein may contain inaccuracies.
The
influence
of foreign
investors
is
felt in
the
regional mall sector of the market where two major malls are
held by
two foreign funds
through
their American
(Table
advisors,
4-3).
Private investors,
are very
smaller neighborhood and specialty centers.
43
active in
the
TABLE 4-3.
ATLANTA RETAIL PROPERTIES INVOLVING FOREIGN INVESTORS
FOREIGN ENTITY
HEXALON
UK LASALLE
LEHNDORFF MANAGEMENT
NORD
WILSHIRE & HOOVER
CONFIDENTIAL
L.J.HOOKER
NORD
CONFIDENTIAL
NORD
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
L.J.HOOKER
NORD
KAN AM
NORD
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
NORO
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
NORD
CAPCOUNT AMERICA
NATIONALITY
DESCRIPTION
NETHERLANDS
UNITED KINGDOM
WEST GERMANY
NETHERLANDS
SINGAPORE
EUROPEAN
AUSTRALIA
NETHERLANDS
WEST GERMANY
NETHERLANDS
WEST GERMANY
WEST GERMANY
CONFIDENTIAL
WEST GERMANY
AUSTRALIA
NETHERLANDS
WEST GERMANY
NETHERLANDS
WEST GERMANY
WEST GERMANY
WEST GERMANY
NETHERLANDS
WEST GERMANY
EUROPEAN
WEST GERMANY
NETHERLANDS
UNITED KINGDOM
PERIMETER MALL
CUMBERLAND MALL
GREENBRIAR MALL
LINDBURG PLAZA
PONCE SQUARE
BRIARCLIFF VILLAGE
SHOPPING CENTER
GWINNETT CROSSINGS
PIEDMONT-PEACHTREE CROSSING
ROSWELL VILLAGE
PERIMETER CT 1,300,000
CUMB/GALL.
1,200,000
SOUTH
639,071
BUCKHEAD
378,962
MIDTOWN
300,000
N.EAST
189,000
COBB CO.
160,000
GWINNETT CO.
154,258
BUCKHEAD
150,736
N. CENTRAL
150.330
PEACHTREE BATTLE
LOEHMAN'S PLAZA
GEORGETOWN
SHOPPING CENTER
DUNWOODY VILLAGE
SWINNETT MARKET FAIR
MARSHALL'S PLAZA
HOWELL MILL VILLAGE
BRANNON SQUARE
CROMWELL SQUARE
CENTRE COURT
WEST PACES FERRY
KENNESAW PROMENADE
BRIARCLIFF-LAVISTA
PARAN PLACE
PIEDMONT PLAZA
BUCKHEAD
BUCKHEAD
N. ATLANTA
N. FULTON CO
N. CENTRAL
GWINNETT CO,
N. CENTRAL
CENTRAL ATL.
ROSWELL
SANDY SPRING
N. CENTRAL
BUCKHEAD
ATLANTA
N. EAST
N. WEST
N. EAST
LOCATION
SIZE
144,431
140,000
121,896
119,000
114,265
108,297
99,740
98,386
88,573
78,110
65,856
60,674
40,000
39,201
28,000
25,000
- 6,013,806 SF
This list is not intended to represent all properties with foreign involvement, and the
information contained herein may contain inaccuracies.
44
While not as prevalent, there is some
part of foreigners
Airlines
has
Buckhead.
in
just
This is
the hotel sector
broken
ground
in line
(Table 4-4).
on
with the
investment on the
a
Nikko
Japan
Hotel
in
company's custom
of
establishing a hotel in each of its destination cities.
Ibis and the Northwest Atlanta
of
foreign
involvement.
The
Hilton are two more examples
The
total
foreign
share
is
estimated to be less than 5% of the market.
TABLE 4-4.
ATLANTA HOTEL PROPERTIES INVOLVING FOREIGN INVESTORS
FOREIGN ENTITY
NATIONALITY
-ESCRIPTION
LOCATION
NIKKO (UNDER CONST)
JAPAN DEVELOPMENT CORP. JAPAN
DAYS INN
FRANCE
SEFRI
IBIS
FRANCE
SPHERE N.A.
PINE ISLAND
SWITIZERLAND
NESTLES/STOUFFERS
UNITED KINGDOM NW ATLANTA HILTON
LAING PROPERTIES
INTERCONT, (UNDER CONST)
GREECE
CONFIDENTIAL
"
INDIA
CONFIDENTIAL
SZE
375
300
260
250
222
371
BUCKHEAD
BUCKHEAD
DOWNTOWN
LANIER
N. CENTRAL
BUCKHEAD
ROOMS
ROOMS
ROOMS
ROOMS
ROOMS
ROOMS
11778 ROOMS
This list is not intended to represent all properties with foreign involvement, and the
information contained herein may contain inaccuracies.
The
multi-family residential
market
is dominated
by
Post Properties, with over 20 apartment complexes throughout
the
city
portion
(Table
of the
4-5).
Private
foreign capital
sector.
45
investors provide
that is
a large
utilized in
this
TABLE 4-5.
ATLANTA RESIDENTIAL PROPERTIES INVOLVING FOREIGN INVESTORS
FOREIGN ENTITY
A.C TOH INVESTMENTS
CONFIDENTIAL
MARUBENI
SEFRI
OBHAYASHI
LAING PROPERTIES
URAMEX
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
LAING PROPERTIES
CONFIDENTIAL
LAING PROPERTIES
HISTORIC URBAN EQUITIES
CONFIDENTIAL
CONFIDENTIAL
POST PROPERTIES
NATIONALITY
SINGAPORE
BELGIUM
JAPAN
FRANCE
JAPAN
UNITED KINGDOM
SPAIN
PORTUGAL
SINGAPORE
CONFIDENTIAL
BELGIUM
UNITED KINGDOM
BELBIUM
UNITED KINGDOM
CANADA
WEST GERMANY
SWITZERLAND
EUROPEAN
DESCRIPTION
LAKESIDE CENTER
LOCATION
BUCKHEAD
NORTHSIDE CIRCLE
APARTMENT COMPLEX
SUMMIT AT LENOX
ANSLEY PARK
N.WEST
N.CENTRAL
BUCKHEAD
MIDTOWN
220
212
176
127
UNITS
UNITS
UNITS
UNITS
APARTMENT COMPLEX
ART CENTER TOWN
HOME PARK SCHOOL
5 DIFFERENT PROPERTIES
CORUM (APTS/CONDOS)
HUNTCLIFF (APTS/CONDOS)
APARTMENT COMPLEX
LULWATER ESTATE (CONDOS)
ANSLEY (CONDOS)
20 DIFFERENT PROPERTIES
CENTRAL
MIDTOWN
MIDTOWN
VARIOUS
N.ATLANTA
N. CENTRAL
N.CENTRAL
MIDTOWN
MIDTOWN
VARIOUS
120
118
150
1,500
550
248
72
48
250
7,000
UNITS
UNITS
UNITS
UNITS
UNITS
UNITS
UNITS
UNITS
UNITS
UNITS
SI2E
226 UNITS
11,017 UNITS
This list is not intended to represent all properties with foreign involvement, and the
information contained herein may contain inaccuracies.
Finally, there is
a great deal of land
in the Atlanta
area that is held by foreign investors and developers
4-6).
L.J.
Hooker, an Australian company,
in residential and mixed-use
development.
(Table
is very active
Many tracts held
by foreigners have been rezoned to higher uses, awaiting the
right
development opportunity.
mixed-use
project
Institutional
Peachtree
planned
Holding
joint venture has
for
Company
office building
L.J.
Hooker
major
The
Dutch
Midtown.
is
involved
in Downtown,
major plans for its
major play, numerous investors
has a
in
and the
project.
the
Tradeport
In another
have banked land adjacent to
the contemplated southward extension of Georgia 400.
46
191
TABLE 4-6,
ATLANTA LAND DEYELOPMENTS INVOLVING FOREIGN INVESTORE
FOREIGN ENTITY
ROTHMAN
LAING PROPERTIES
MITSUI
SHIMIZU CONSTRUCTION
WILMA SOUTHEAST
CONFIDENTIAL
LAING PROPERTIES
L.J.HOOKER
L.J.HOOKER
LAING PROPERTIES
LAING PROPERTIES
CONFIDENTIAL
L.J.HOOKER
A.C TOH INVESTMENTS
L.J. HOOKER
L.J.HGOKER
ROSTLAND
CONFIDENTIAL
DUTCH INSTITUTIONAL H.C.
LAING PROPERTIES
LAING PROPERTIES
WILMA SOUTHEAST
MARK III
TAYLOR WOODROW
CONFIDENTIAL
WILMA SOUTHEAST
L.J.HOOKER
DUTCH INSTITUTIONAL H.C.
L.J.HOOKER
L.J.HOOKER
EDUIPROP
L.J.HOOKER
CONFIDENTIAL
CONFIDENTIAL
EURAM
MONARCH DEVELOPMENT
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
TRANS 0 FLEX
NATIONALITY
CANADA
UNITED KINGDOM
JAPAN
JAPAN
NETHERLANDS
CONFIDENTIAL
UNITED KINGDOM
AUSTRALIA
AUSTRALIA
UNITED KINGDOM
UNITED KINGDOM
CONFIDENTIAL
AUSTRALIA
SINGAPORE
AUSTRALIA
AUSTRALIA
CANADA
WEST GERMANY
NETHERLANDS
UNITED KINGDOM
UNITED KINGDOM
NETHERLANDS
WEST GERMANY
UNITED KINGDOM
EUROPEAN
NETHERLANDS
AUSTRALIA
NETHERLANDS
AUSTRALIA
AUSTRALIA
SOUTH AFRICA
AUSTRALIA
SAUDI ARABIA
CONFIDENTIAL
NETHERLANDS
UNITED KINGDOM
WEST GERMANY
EUROPEAN
EUROPEAN
WEST GERMANY
WEST GERMANY
WEST GERMANY
WEST GERMANY
MF- MULTI-FAMILY RESIDENTIAL
BP - BUSINESS PARK
IP - INDUSTRIAL PARK
DESCRI PTION
RESIDENTIAL UNITS
MAYFAIR
ATLANTA TRADEPORT
USE
LOCATION
MIDTOWN
MF MIDTOWN
BP AIRPORT
"
"t
"P
"
SI IS
UNITS
6 ACRES
SF
70,000 SF
1,000 ACRES
587 ACRES
550 ACRES
155 ACRES
70 ACRES
18 ACRES
992 ACRES
300 ACRES
65 ACRES
20 ACRES
15ACRES
1,232,000 SF
1,200,000 SF
700,000 SF
200,000 SF
177,000 SF
OFFICE PARK
BP
HIGHLANDS PARKWAY
BP
MEDLOCK BUS. CTR.
PP
BP
WESTFORK BUS. CTR.
CAMP CREEK PARKWAY
HP
PEACHTREE CORNERS
BP
HP
OFFICE PARK
IP
1-85 & SHAWNEE RIDGE
ATLANTA INT'L INDUST. PARK IP
SOUTHSIDE D1ST. CTR.
IP
MU
10TH STREET
MU
MIXED-USE PROJECT
OB
BUCKHEAD PLACE
191 PEACHTREE
OB
OB
PALISADES
OB
INTERCHANGE
CENTRUM AT GLENRIDGE
OB
PLANNED OFFICE BLDl
OFFICE PARK
0B
CUMBERLAND CENTER-PHASE IIIOB
OB
PLANNED OFFICE BLDG.
OB
BROOKHAVEN STATION
RAVINIA
OB
RT
PRE-DEVELOPMENT
RT
PRE-DEVELOPMENT
RT
FUTURE SHOPPING CENTER
SF
VARIOUS
CAMP CREEK RESIDENTIAL
SF
SUBDIVISION
SF
CLUSTER HOUSING
SF
SUBDIVISION DEVELOPMENT
SF
PEACHTREE-MAPLE TRACT
OB
HAVERTY'SITABER
OB
0B
AKERS MILL
LAND PARCEL
OB
STOPLIGHT TRACT
OB
AMOCO-JOINER TRACT
0B
MOORES MILL CLUB/I-75
CL
N. WEST
N. WEST
N. EAST
ATLANTA
SOUTH
GWINNETT CO.
N. WEST
SOUTH
SOUTH
AIRPORT
MIDTOWN
LENOX
BUCKHEAD
DOWNTOWN
PERIMETER CT
PERIMETER CT
PERIMETER CT
MU - MIXED-USE
SF - SINGLE-FAMILY RESIDENTIAL
CL - CLUB
OB - OFFICE BUILDING
RT - RETAIL
CT
COBB CO.
CUMB/GALL .
PERIMETER CT
N. CENTRA L
PERIMETER CT
N. GWINNE TT
N.COBB C0.
LANIER
VARIOUS
SOUTH
ATLANTA
DOWNTOWN
VARIOUS
BUCKHEAD
ATLANTA
ATLANTA
LENOX
BUCKHEAD
BUCKHEAD
N.WEST
This list is not intended to represent all properties with foreign involvement, and the
information contained herein may contain inaccuracies.
47
1LA9,0400
87 ACRES
15 ACRES
S ACRES
5 ACRES
2 ACRES
230,000 SF
180,000 SF
13ACRES
2,000 ACRES
960 ACRES
352 ACRES
30UNITS
400 UNITS
7 ACRES
5 ACRES
3 ACRES
ACRES
2 ACRES
2 ACRES
12 ACRES
Our
research found
integrated
vertically
estate
development
that some
into
foreign investors
have
of the
real
numerous
process.
We
aspects
found
them
doing
land
development, design management, construction or construction
management, leasing
and brokerage, and
property management
(including landscape installation).
To get a feel for the different players and to show the
different ways
in which they
operate, we have
the next chapter four different
the Atlanta real estate market.
48
profiled in
investors who are active in
CHAPTER 5
PROFILES OF FOREIGN INVESTORS IN ATLANTA
chosen to illustrate four
We have
that
Atlanta
market.
pension
fund
Included
are a
company
corporation
brief look at the Japanese
market.
Each
is
owned
by
and
England,
from
privately-held Dutch merchant builder.
diversified
a
that
in the
well-capitalized
large,
Holland,
from
investment/development
publicly-traded
foreign influence
diversity of
represent the
different investors
a
a
We have also taken a
investors that are active in the
has characteristics
of these investor groups
that make it unique to the Atlanta market.
DUTCH INSTITUTIONAL HOLDING COMPANY, INC.
("DIHC")
[133]
"Dutch Money Helps Downtown Soar."
Recent article in Atlanta Business Chronicle [69]
DIHC came to
Atlanta in July of 1980.
investment arm of PGGM, a
are doctors, nurses, and
It
is the U.S.
Dutch pension fund, whose members
other medical personnel working in
the Netherlands.
Like
many large
pension funds,
DIHC has
invested in
office buildings in cities across the eastern U.S. including
Boston, Washington,
D.C.,
These deals are structured
Charlotte, Orlando,
and Atlanta.
as joint ventures with top-notch
49
possible.
in the
committed to invest,
foreign investors,
one of the top
Atlanta, it is
In
as DIHC
is $100 million,
minimum deal size
The
billion invested, or
has $1.3
U.S.
with the best location
grade office buildings
institutional
in
involved
be
to
wants
DIHC
companies.
development
with $450 million invested or committed in the market.
Stereotypes
DIHC
conservative.
hands-on approach in an effort to
President of
activity.
is now
the
investments such as the
Moving from conservative
fully-leased Class A office
acquisition of
downtown
buildings, DIHC
development of office
involved in the
buildings in
Boston,
Washington,
of
districts
business
up the
company's recent
typified by the
This is
Herman Vonhof,
is stepping
that the fund
DIHC, says
learning curve.
But
the portfolio.
quality of
very
the long-term
holds its properties for
(15-20 years) and takes a
control the
are
investors
European
that
hold
Atlanta, and Chicago.
provide the equity and debt
DIHC recently committed to
a $250 million, 1,200,000 s.f.
financing for 191 Peachtree,
office
building
venture partner in
and
downtown
in
the deal with Gerald
Cousins Properties.
downtown
Atlanta,
Atlanta
Vonhof is
feels that
when
many
DIHC
on
as
with
no
regional manager
understand
the comeback of
enthusiastic about
50
joint
to
an investment
others couldn't
a
its commitment
a partner
Chip Davidson,
DIHC made
is
D. Hines Interests
Indicative of
DIHC signed
pre-leasing requirements.
of Hines,
Atlanta.
in downtown
it
[116].
the Downtown
market,
a
has made
DIHC
that
positive
he is
and
wise
investment.
In
money during
Originally,
phase.
the construction
At the
loan.
characterized as a construction
this will be
putting up
DIHC is
venture,
the Hines/Cousins/DIHC joint
all the
of deals.
many different types
involved in
DIHC gets
end of the construction period, half of the loan converts to
a permanent loan (sub
the other
10% interest rate, 30
half converts
cumulative
preferential
The
to equity.
equity has
it
The remaining
doubles, then it remains level at that point.
cash flow after debt
a low
until
up
steps
that
return
year term) and
and preference payments is distributed
50% to DIHC and 50% to the development partners.
Vonhof believes that a critical
capacity and ability
Gerald Hines
the company
element of DIHC is its
to negotiate with the
This
and Trammell Crow).
has the full
big boys
(i.e.,
is possible because
support of the Dutch
home office
behind them and the authority to cut the deal once the green
light has been given.
Vonhof competes
During quarterly meetings in Holland,
with his
counterparts from other
The Dutch fund has pegged
the world for project approvals.
20% of
its funds
parts of
for real estate
investment, with
40% of
that amount allocated to the U.S.
Resort Development: To our
DIHC
also developed,
manages
surprise, we found out that
and owns
the Grand
Cypress
Resort, a 1,500 acre golf course resort in Orlando, Florida.
The project
includes a
750-room Hyatt
51
hotel,
45
holes of
golf
this deal in several
plan to reproduce
DIHC and Vonhof
range.
a
center, and a planned Jackie
tennis facility, an equestrian
Stewart shooting
rental villas,
Nicklaus, luxury
Jack
designed by
different marketplaces around the U.S.
and the world.
breaks
DIHC
conservative
risk,
entrepreneurial
in
to
comparison
of
U.S.
more willing to take on
it
times
at
and
have
we
establishing its
Since
pension funds.
office, DIHC has been progressively
development
image
traditional
the
most
outright
looks
domestic
pension
funds.
("Laing")
LAING PROPERTIES, INC.
[117)
"All our earnings are reinvested in the U.S.....
We have never sent a penny back!"
Jim Gillespie, Senior Vice President,
Laing Properties, Inc.
Laing is a wholly-owned subsidiary of Laing Properties,
plc. The parent company is a large, British-based investment
and
anniversary this year.
headquarters in
active British
long-term
operations.
player in
The
its
celebrating
140th
1976, Laing established its U.S.
In
Atlanta.
investor that
is
that
firm
development
is by far
It
the Atlanta
utilizes very
portfolio
company's
52
and away
market.
the most
Laing
little debt
contains
is a
in its
numerous
types
property
have been
that
or developed
developed internally,
investments,
other joint
along with
The properties are located throughout the
venture partners.
Southeast.
as
acquired
real
a full-service
represents
Laing
estate
company.
Developments:
Past
reflects as
The
much diversity in
on more diversity to come,"
in a
Daily Reporter
over
2 million
hotel,
more than
12
said George L.
review of its
A
s.f of
Laing
does in
its geography as it
interview with
recent
[59].
of
portfolio
"Count
of real estate properties.
its types and categories
President,
Atlanta
office and
Aulbach, Laing's
the Fulton
County
portfolio indicates
business park
apartment complexes,
space, a
a senior
adult
retirement community, and industrial parks.
When
Laing
came
to
Atlanta, it
started
out
as
a
development and construction company,
focusing on Section 8
housing
It did
and office
joint ventures.
not take
the
company long to find out that working with H.U.D. was not as
profitable as
pursue
had been
commercial
expected; therefore, it
properties
and
other
decided to
private
sector
developments.
Laing's first
build-to-suit
Laing acquired
commercial endeavor was a
office building
for IBM.
the Lenox Towers office
In recent
369,000 s.f.
of office
space.
Laing renovation in the Atlanta area.
53
years,
complex in Buckhead
and invested $5 million in its renovation.
contain
joint venture
These two towers
This
is the
only
Business Center
Newmarket
into business park
development.
was
Laing's
acre park with
It is a 75
The company
600,000 s.f. of completed office/service space.
Lakeside, a 35
also developed
venture
first
acre business park
that has
313,000 s.f. with 5 buildings- 4 office/service and 1 office
St.
building.
Insurance Company
Farm
is
joint
a
venture
partner in this deal.
It was
County.
in Cobb
that allows Laing
in 1991.
Atlanta Hilton
the 222 room Northwest
Laing developed
later sold under
a sale/leaseback
to a buy-back
the right of first refusal
Laing presently manages the hotel in-house.
Laing's
first retirement
248 unit Huntcliff
property development
It
Summit in Atlanta.
and the company expects to rent
is the
is very upscale,
50% and sell 50% as condos.
According to
Laing will hold onto 100% of what is not sold.
Aulbach, Huntcliff Summit is a prototype development for the
"active retiree" in the Southeast [59].
Present and Future Development:
reflect its
projects
Business Centre, a 150
park under
development in East
city.
space
Presently,
are under
users.
twin tower
Point on the south
Because there
in Midtown.
54
is so
much
of the tracts
is the Mayfair, an
apartment project
side of
of office/distribution
expects to sell some
The second
is
acre office/distribution
120,000 s.f.
construction.
acreage involved, Laing
to end
The first
broad-based approach.
Camp Creek
the
Two of Laing's current
$80 million,
Construction is
This
scheduled to begin on the first tower in August, 1988.
is Laing's first venture into high-rise apartments.
Laing
does have
some office
mostly new
phases to
be added
to current
will be developed cautiously, Aulbach says,
They
projects.
"...
The Palisades,
be right" [59].
the market to
the works,
buildings in
when we deem
a planned 28
story tower, will be a joint venture with DIHC.
Strategy: Over the past year,
directed at
the quality
apartment market.
rental segment of
Tennessee.
Crow, Laing is acting as money
a number
of projects
at least 50% of the deal
equity.
S...an
Aulbach
a total
will have
These investments
Florida,
Atlanta,
in
and
value of
In each case, Laing has
around $100 million at completion.
its
the residential
In association with specialist developers
such as Calibre and Trammell
partner in
the main thrust has been
and will get a preferred return on
views Laing's
entrepreneurial investor
joint venture
we
where
are the
role as
equity
partner, but we are not necessarily silent" [59].
to the
Exposure
been reduced
overbuilt Atlanta
progressively over
several of
allowed Laing
projects.
the company's
to maintain
Atlanta office and to retain
the past several
has
years by
investors into joint ownership
bringing major institutional
on
office market
This
approach has
its operational presence
in the
the rights to participation in
while freeing up
substantial financial
resources for redeployment elsewhere.
The strategy has also
future developments
helped
Laing to
expand its
roles as
55
direct investor
and
partner.
investment
will
allow Laing
greater emphasis
The
to move
more quickly
currently
looking at
on these
roles
and more
into new
promising markets.
is
Aulbach
in
projects
joint
horizons well beyond
$400
looking
Florida,
for
and
retail
to expand
Laing's
planning
is
located.
in
the
Virginia, Richmond,
Birmingham.
possibly
include residential and
center
experienced
Atlanta where about 80
opportunities
northern
Nashville
also
in investment
million
with
ventures
Aulbach is
developers.
develop shopping
like to
He would
opportunities.
development
retail
percent of its
The company
is
Southeast,
including
Raleigh,
Columbia,
Potential
products
retirement home development, retail
centers and office buildings.
The emphasis
than office
the softening
in Atlanta will be
development, a
office market
on residential rather
shift of strategy
here.
triggered by
Aulbach would
like the
commercial/residential investment split at Laing to be 50/50
by the year 1991.
Gillespie characterized Laing
as an investment company,
and not as a developer:
"The developing is a means to an end. If we could
purchase leased-up properties at the right price,
then we
would.
We manage all
of our own
properties in house. If we could find a leasing
or management company that could give us the kind
of service that we desire, then we would contract
it out to third parties, but we can't."
Laing has a construction
management division which was
56
the company's Section 8 housing.
the general contractor for
Laing was also the general contractor on other developments,
but the
staffing levels
problems dealing with
company had
Currently, the construction
during down real estate cycles.
Laing's contracts using outside
management division manages
general contractors.
The
The buy and sell decisions are made by Aulbach and
company.
the
the parent
a board member of
the President and
Aulbach is
personnel.
U.S.
by
staffed
fully
is
company
chief
executive officer
of
Major
parent firm.
the
decisions must be approved by the British board.
Laing has
times,
it
the ability
just takes
a
to make quick
phone
call.
decisions.
Numbers
are
Many
faxed
"across the pond" and answers are usually received within 24
hours.
With
only
a
England and Atlanta,
five hour
time
it is not much
difference
between
different than talking
to California.
With
an
initial
Gillespie does not
capital
in
of
see the parent company
the U.S.
reinvested in the
capitalization
subsidiary.
U.S.
All
$60
million,
putting any more
the earnings
"We have never sent
are
a penny back,"
according to Gillespie.
Laing
working
uses
good, not
borrowings in
limit
little
towards increasing
leverage as
to
very
bad.
leverage.
the use
Laing
of debt,
plans to
dollars rather than pounds
currency
risk;
however, the
57
The
company
is
viewing more
use increased
sterling in order
primary
focus
on
currency risk remains at the parent company level.
equity
on its
returns
annual
looking for
is
Laing
sufficient to double the net worth of the company every five
Cash flow is highly valued, but capital appreciation
years.
is also a major requirement from the investments.
that the U.S. operations
Gillespie feels
benefit from
the financial stability and reputation of the British parent
those
because
are
Attractive deals
company.
presented
are
strengths
to the
company
by
domestic
recognized
developers.
and
Laing is into
many product types, as
a developer.
Along
arms, the
estate company.
management
leasing and
with its
company has integrated
both an investor
into a full
service real
A strong capitalization and
a presence in
definitely help to make
Laing a major
the Southeast market
player in Atlanta.
WILMA, INC.
("Wilma")
[119]
"People see Wilma as a domestic company.
An outsider will not see much difference
except
between Wilma and Trammell Crow
doesn't
and
that Wilma is more conservative
hold onto its property."
Charlie Graham, President of
Wilma is the U.S.
Dutch
development and
Wilma Inc.
subsidiary of Wilma International, a
construction
58
company.
Unlike
many
office
developed
also has
company
The company
has
parks,
and
business
buildings,
While headquartered
single-family residences.
the
for sale.
property
and develops
wisdom
face of conventional
Wilma flies in the
foreign investors,
Florida, Texas,
in
operations
in Atlanta,
and
California.
Wilma is staffed with predominantly American personnel.
"The management
Graham explains,
U.S.
real
estate environment.
office is from
from Houston.
head
the head of the Los
of the
the
Atlanta
Houston office is
The head of the
Atlanta.
And,
The
in
grew up
of Wilma
Angeles office has
been in Los Angeles for 20-25 years."
The company was initially capitalized with $35 million.
The
parent
requires Wilma to
not
a
company has
able to provide credit
Through
million unsecured
that he
does not
the Dutch owners,
However, the
but
balance sheet
stand on its own two feet
provide guarantees).
contacts.
substantial
(i.e.,
it does
parent company
is
sources through its European banking
these sources, Wilma has
revolving credit line.
obtained a $35
Graham indicated
expect additional capital
and the U.S. operations
infusions from
are basically on
their own.
Actually, very little leverage
is utilized when making
a deal.
The corporate balance sheet has a debt/equity ratio
of 2:1,
less than
most domestic
return on equity in the 7-8%
10%.
developers.
Wilma
has a
range, less than the target of
Graham indicated that additional leverage must be used
59
if the company is to reach this target.
As merchant builders, Wilma is concerned with
Strategy:
cash
International was
formed fifty years ago
construction mentality
and the
selling
minimized by
equity.
as a construction
over.
has carried
and leased-up, risk
a property is built
believes that when
Graham, "Wilma
The parent company
to a profit orientation."
They are used
is
According to
asset values.
flow and
company
than developing
from property sales rather
booking profits
the
and recovering
the property
Graham disagrees:
"You get your money back, but you must find
estate with similar
another investment in real
is
This
return characteristics.
and
risk
the
difficult because you have to go around
playing board all over again. You have to restart
the risk cycle inherent in development."
Graham believes
the long run
success in
located property,
need, and
mature
that the developers with
create
according to
property,"
pays
"It
to
it to
good
the
hold
is attempting
He
Graham.
a market
order to allow
property in
value.
find strategically
in response to
develop product
then hold the
and
are those that
the greatest
to get
Wilma International to hold onto the next office development
beyond lease-up.
the U.S. officers disagree in
It is interesting to see
principle with its Dutch parent on corporate strategy.
no less
conflict
is
company;
however, it
attempting
to
occur within
to
likely
illustrates
influence
the
60
way
how
a
domestic
U.S. personnel
foreign
This
investors
are
do
business here.
in the select markets that
Wilma's strategy is to grow
and
line
product
good
it
additional capital if
market.
Therefore, it
ventures
joint
is
remain a major player in
to
one of the largest trading
The Atlanta Tradeport
is
development
located
International Airport
to
adjacent
complex.
the
directly linked
and is
mixed-use
million s.f.
The
Hartsfield
via Aviation
It enjoys proximity to three interstate highways
Boulevard.
service that goes to the ports
and to rail
Brunswick.
project that will
business
international
and
domestic
largest
the
(Shimizu).
is a 260 acre
developed into a 3.5
of
one
and
(Mitsui)
construction companies in the world
ultimately be
the
Sake Keg": This
"Breaking the
Tradeport -
Japan
in
to
will form more
is likely that Wilma
joint venture matches Wilma with
companies
access
needs
it
people, but
to the Tradeport project.
similar
The Atlanta
upon its
company wants to leverage
The
already in.
it is
The
of Savannah and
Atlanta's only
Tradeport is
Foreign Trade
Zone.
Early in
the pre-development,
hard about how it was
in the Netherlands and West
Japanese
capital in
"With
to tap into the Wilma network
Germany, primarily for leads in
project," explained
company's Southeast
long and
going to market the Tradeport.
our European roots, we wanted
marketing the
Wilma thought
operations,
the U.S.
61
in
Skip Beebe, head
a recent
[72].
"We
of the
conference on
also determined
that the Japanese were a very, very prime target in terms of
(primarily
product
this
marketing
huge
the
Japanese manufacturing and distribution
Georgia presence of
trading companies and banks.)"
firms,
to
related
Beebe continued:
S...so the challenge to us was how do we penetrate
the Japanese market. We decided to try to attract
the
give us
could
partner who
a Japanese
market
visibility and credibility in the Japanese
so we would be able to go forward and market
aggressively in
We were
East.
Japan and the Far
interested in attracting a passive partner.
not
We wanted a partner who would be active, who would
take a very active role in marketing the project,
who would work with us to understand the decision
making process,
Japanese."
In
It
partner.
Wilma identified
1985,
late
partnership.
for
the criteria
investment by the
a possible
Mitsui as
negotiate
an
additional year
to
Mitsui's
decision-making
process
took
was
the
very
Information was passed from the Atlanta office
complicated.
to the New York office and then on to Tokyo.
determined and sent to the
Responses were
New York office, which forwarded
This process was used for even
them to the Atlanta office.
the smallest details of the negotiation.
is a
Mitsui
Therefore,
developer.
Company to
and
25%
company and
not
invited
Shimizu
it
participate in
venture partners
equity.
trading
project.
the
Shimizu.
The
preferential return of 8%.
banking relationship
estate
Construction
Each of
to contribute $5
was required
The ownership is split
to
a real
the joint
million in
50% to Wilma, 25% to Mitsui
equity
contributions
earn
a
Mitsui and Shimizu arranged the
debt required to
for the
62
develop the
The joint
property.
financing that uses
as opposed to traditional
credit line,
revolving
an unsecured
has
venture
the real estate as collateral.
s.f.
175,000
This
Glenridge.
15%
of
this
of the
Because
by
over-built office
the building
prior to
the pre-leasing
planned on selling
company had
balance
the
If unsuccessful in
starting construction.
efforts, the
and
equity
to pre-lease
Wilma decided
market,
by
financing.
construction
at
total cost is $25 million, with
The
provided
Centrum
the intersection of
project is located at
1-285 and Georgia 400.
the
called
building
office
on a
broke ground
Wilma recently
Future Development:
the property.
space pre-leased, Graham is hoping
However, with 1/2 of the
to convince Wilma International that the company should hold
on to
creation opportunities
of the value
Centrum because
that the Georgia 400 extension provides.
The fact
doors that
that Wilma is an
otherwise would
access to other European
the
company's
strong
international company opens
be closed, giving
investors.
Dutch
it increased
Graham also feels that
parent
helped
give
Wilma
increased credibility in attracting Mitsui and Shimizu.
The
currency
company is
not affected
differential has
been
by currency
overplayed,"
risk.
says
"The
Graham.
"So many foreign investors have dollars so it doesn't impact
them, and European pension
funds designate a certain amount
of their liquid investments into U.S.
63
T-bills."
contrast to
that
is
As a
this characterization.
staffed by
personnel
U.S.
as
stark
merchant builder
and operating
many U.S.
capital constraints comparable to
in
stand
operations
Wilma's
investors,
long-term
are characterized
investors
most foreign
Whereas
within
developers, it
looks very domestic at this point in time.
THE JAPANESE
too many trees."
"...
Reason given by a Shuwa executive for
of a major
off the purchase
calling
office building in Atlanta [130]
"The sleeping giant in Atlanta real estate
is Japan."
Tarby Bryant, Braemar Group Ltd. [7]
market,
absent from
Japanese noticeably
With the
is there
any
truth to
the headlines with their
statement?
Tarby Bryant's
the Japanese investors that
Where are all
the Atlanta
have been making
purchases of major office building
in New York, Los Angeles, and Washington, D.C.?
Jerry Sauls
of Richard Ellis, Inc. theorizes [130]:
"The Japanese don't understand Atlanta. They see
Atlanta as a city with no center, no signature
properties, and no supply constraints."
The
case
of
Shuwa,
illustrates this point.
a
major
Japanese
investor,
The company entered into a contract
to purchase a major office
closing,
a
Shuwa executive
building in Atlanta and prior to
from
64
Tokyo
came to
town
to
After flying over the
inspect the building.
helicopter, he
promptly called off the
When the Japanese
are too many trees."
building in a
deal saying, "There
see Atlanta,
they see
a blanket of trees, which they equate to an unlimited supply
of land,
Shuwa typically
investors like
and institutional
prefer a supply constrained market.
The Japanese
may also be hesitant
Europeans, when the Japanese
they are
not in close
overseas.
companies
However,
because, unlike the
invest and develop in Atlanta,
proximity to their
with
many
establishing offices
of
parent companies
the
in New
larger
Japanese
York, communicating
with Atlanta will be easier in the future.
Bryant
explains his
rationale
on why
he thinks
the
Japanese are poised to make an impact on Atlanta:
"With all the major Japanese banks
currently in
Atlanta and two airlines, JAL and Delta,
now
flying direct links to Japan's Narita Airport, I
am confident that we will see more Japanese
investors walking the streets of Atlanta looking
at our office buildings, hotels, and regional
malls."
Despite the
Japanese in
city.
We
lack of
Atlanta, there
headline-making purchases
is a
Japanese presence
did identify projects where
construction companies
by the
in the
Japanese trading and
were involved, and a
major Japanese
life insurance company owns 50% of the Equitable Building in
downtown Atlanta.
65
Construction Companies
In
two Japanese
last year,
the
construction companies
have entered into joint ventures with local developers.
example
of
this
the
is
project previously
Wilma/Mitsui/Shimizu
Tradeport
a joint
example is
Another
discussed.
One
venture between Kajima Construction Company and L.J.
Hooker
acre industrial park
with 2
develop a 550
(Australian) to
million
According
s.f.
to
Simpson,
Boyd
In
of
president
planned.
Hooker
L.J.
industrial JV in
is the first Japanese
Developments, "This
the U.S."
space
office/distribution
of
[131]
companies, Japanese
U.S. construction
contrast to
contractors are large, integrated organizations that offer a
full-service package.
designers on
They
their staff
have architects, engineers, and
and will take
care of
the whole
development process for a client.
The
capitalized
Japanese
and
available to them.
their entry into
construction
have a
This
the U.S.
wide
range
companies
are
of financing
well
options
financial strength has facilitated
market.
The
ability to deliver
financing is used to get domestic contractors and developers
to enter into joint venture projects with them.
ventures provide
the U.S., to make
the means to penetrate
various markets in
attractive investments in U.S.
and to expand their international billings.
66
These joint
projects,
Trading Companies
Two
the
the Tradeport project.
in
tenants
trading company that has
Another Japanese
in
a
Apartments.
project
apartment
high-rise
invested in
It is a joint venture
Atlanta is Marubeni Trading Company.
partner
with
These companies are viewed as
access to Japanese companies.
potential
the
into
brought
marketing arm
a
provide
deal to
Tradeport
Atlanta
Mitsui was
profile,
Inc.
Wilma,
As discussed in
Atlanta real estate deals.
investments in
made
recently
have
companies
trading
Japanese
Lakeside
called
This is Marubeni's first investment in Atlanta,
to their
but according
local investment
advisor,
"They are
looking for other deals" [128]
The
goal of
Japanese
trading companies
for every
trading
kind
companies
as
Mitsui and
concentrate on brokerage rather
occasion,
they
will
Japanese client
market
entry.
firms in
temporary means for
A few
to
than direct investment.
On
on
order to
intend for
Sumitomo
large
want
co-venture
They
client.
of Japanese
such
find,
all types of U.S. real
analyze, finance, manage, and market
estate
is to
U.S.
ease the
this direct
projects
with
client's U.S.
role to
be a
establishing intermediary relationships
in the U.S. real estate business.
Life Insurance Companies
Prior
significant
to
real
1987,
the
estate
Japanese
investment
67
had
in
made
only
Atlanta.
one
This
occurred approximately five years ago when Asahi Mutual Life
President
Management, Inc.
Real
Equitable
of
downtown
in the
interest
Batson, Senior
According to Donald L.
Equitable Building.
Vice
50%
purchased a
Co.
Insurance
Investment
Estate
[111]:
"It was mere coincidence that Asahi came to
This was because the
Atlanta at that time.
Equitable Building had been presented to Asahi as
spread out across
part of a package of buildings
the U.S. Asahi decided to buy the package and
ended up with a building in Atlanta."
recent article, a
In a
spokesman for Asahi
says that
the company invested in a downtown building because [89]:
Japan
the downtown area.
The Japanese like
doesn't have subdivisions like the U.S.- generally
We purchased this building five years
speaking...
It's the first property for us (in Atlanta).
ago.
We prefer established buildings downtown and joint
ventures
with big
we are
companies because
not
familiar with your city.
A number
of Atlanta real estate
professionals believe
that the real estate subsidiary of a Japanese life insurance
company is negotiating
$320
million.
In
Atlanta,
there are
centrally located signature properties.
limit
future
in Midtown for
to buy the IBM tower
investment
very
these
This would seem to
life
insurance
companies are
generally
Japanese
by the
few of
companies in Atlanta.
The
Japanese life
considered
investors in
to
be the
insurance
most
conservative
U.S. real estate.
68
They
of the
Japanese
prefer joint ventures
or American insurance companies,
with "big-name" developers
and they
is
prime buildings
on existing
major
Their focus
in financial
districts of
reluctant
They are
cities.
horizon.
investment
have a long-term
to
invest in
growing
cities, suburban areas and development projects because they
believe that such investments are too speculative.
In the future, as the number of trophy-grade properties
in Atlanta,
as a whole, diminishes,
and the U.S.
life insurance companies will
expect that the
outside
of
the
team up with
companies to develop different
the construction and trading
products
we would
central
traditional
business
districts.
Others
There were other investments
that involved
research
life
insurance funds,
companies.
of
Japanese investors
trading companies,
the
In
Estate, a
development company
Atlanta.
These
they left the
early 1980's,
single
family
Mitsubishi
projects in
lots on
174
on 89 acres, and a commercial
acres, 110 single family lots
We
the
and construction
completed three
included 300
strip center on 6 acres.
other than
to note these different types
It is interesting
Japanese investors.
that we identified in our
were not able to determine why
market, and our research did not
turn up any
other Japanese developers in Atlanta.
Nikko Hotels and Prudential
in
the
development of
a
Nikko
69
are joint venture partners
hotel in
Buckhead.
The
with
of 1988,
the end
at
be started
hotel will
Atlanta
financing being provided by the Industrial Bank of Japan.
An unusual Japanese investment that we found was a golf
the northern
development in
course
part of
the city.
A
wealthy Japanese individual is planning to develop, own, and
operate a
and club
golf course
mixed-use project being developed
house on
a major
land in
by Mobil Land Development
Company.
Because we believe that the Japanese are poised to make
in
a move
Atlanta, we
investor types
been
of
no mention
all part
in the market.
Japanese trust
of
the Japanese
only
funds,
banks, who
investment community.
overview of
more comprehensive
the
There has
banks, pension
leasing companies or commercial
desiring a
those
to profile
chosen
that are already
security firms,
are
have
For
Japanese
investors and their strategies in the U.S., we recommend the
following sources:
Lindner, Russell C.,
Japanese Investment in
Trends, and Outlook.
and Monahan, Edward L.
U.S. Real Estate: Status,
Center
Cambridge: M.I.T.
for Real Estate Development, 1986.
or
Sears, Cecil E. Japanese Real
New
in the United States.
1986.
2,
October
Society,
70
Estate Investment
The Japan
York:
CHAPTER 6
CONCLUSIONS
chapter,
generalize
we
implications.
last
the
during
role
prominent
our
about
investors,
Foreign
played the
the Europeans have
Rather,
the story.
are not
a more
search for
that in Atlanta, the Japanese
It so happens
balanced view.
most
have endeavored to
research, we
In our
on the Japanese.
estate have focused excessively
U.S. real
investment in
on foreign
recent studies
of the
Many
their
and
findings
like
this
In
decade.
their
domestic
counterparts, are not a homogeneous group with generalizable
that
own idiosyncrasies
have their
They all
attributes.
differentiate them from one another.
investors.
U.S.
"port-of-entry"
is a
Atlanta
Many
city
European companies have
headquarters
Atlanta
in
for many
foreign
established their
because
it
easily
is
accessible, has a good quality of life, and is strategically
placed
as
Southeast.
a
gateway
They made
large international
and
a
other
size
Sunbelt
in
the
to avoid
the
cities
conscious decision
cities in
and Washington, D.C.)
complexity,
to
the east (New
York, Boston,
because of the tremendous competition,
of
deals
counterparts, the foreign investor
diversify into some of the
involved.
Unlike
many
in Atlanta is willing to
smaller cities of the Southeast,
71
and Atlanta is well placed from which to do.
in
investors
Foreign
opportunistic
in
Conventional
opportunities.
real estate
on
capitalizing
are
Atlanta
wisdom says that the foreign investor shows an exceptionally
the
located in
properties
investment
New York,
as
such
of
Los
to this,
In stark contrast
Washington, D.C.
grade
business districts
central
recognized cities
internationally
Angeles, and
tenanted,
fully
for
preference
strong
Atlanta exhibits the flexibility to
the foreign investor in
invest in all product types and locations.
cities mentioned
Unlike the
above, Atlanta is
a city
Instead, it has numerous commercial nodes
without a center.
The foreign investor
that are spread out into
the suburbs.
in Atlanta has shown the
willingness to look outside of the
downtown
market
approximately
real estate
for
foreign
150
opportunities.
in downtown Atlanta.
Atlanta, only 12 were
we
investments that
of 10 office buildings, one hotel,
Out
of
found
in
These consisted
and a tract of land that
is pre-developed for a 1.2 million s.f. office building (191
Peachtree).
In Atlanta,
that
the foreign
foreign
it is
difficult to
not involved
investor is
activity in
find a
office, retail,
property type
in.
There
industrial, land
is
and
hotel development.
Laing Properties, Inc.,
good deal
of property north
a British-based company, owns a
of the Perimeter
72
Highway.
It
also
project near the airport in
aversion
on a
"We have no real
assistant
Amanda Degenhardt,
Laing, in an interview with
marketing services director for
the Atlanta Business Chronicle
tower
a two
break ground
south Atlanta.
said
to downtown,"
to build
waiting to
and is
Midtown,
in
project
plans
Towers, has
owns Lenox
[89].
"The things we've planned we've had a long time in
are,
opportunities
go where the
We
planning.
where the key areas to put property are."
Jack
Alexander,
executive
Realty, a Dutch company,
vice
president
Noro
of
agreed with Laing's assessments in
the same interview [69]:
we're
a market
as
identified
is
"Atlanta
the growth
People go where
interested in.
We have a belief in Atlanta and
corridors are.
we've been trying to invest preceding the growth
curve."
Foreign investors in Atlanta
are involved in both
foreign
investor
long-term horizon.
is
investment and merchant building.
typically
also found
this
from
cash
characterization.
usually
his company as a
long-term asset
sold after
having
as
it is
a
that are
investors who
Charlie
more interested in booking
flow and
of
The
DIHC and Hexalon.
numerous foreign
president, characterized
that is
thought
Atlanta has foreign investors
no exception to this, i.e.
We
take development risk and
73
Wilma's
merchant builder
profits than developing
values
built and
Graham,
depart
[119].
Property is
substantially leased.
only
of
consists
portfolio
Wilma's
developers,
larger
of Atlanta's
considered one
is
though Wilma
Even
three
properties that it owns directly.
[131].
L.J.
Homes and
the
in sales
foreign merchant activity include
Other examples of
Monarch
per year
$150 million
has approximately
company
Boyd Simpson,
president,
its
According to
builder.
a merchant
to be
considers itself
Hooker also
L.J.
Homes, both
Hooker
home building
subsidiaries of foreign investors.
foreign
The
geographically
has
in Atlanta
investor
Many foreign
other southeastern markets.
diversified into
investors located their headquarters in Atlanta because they
saw
it
as
a
good
from
place
to
which
geographically
diversify into other Sunbelt cities in the Southeast.
and
Eastern use
Atlanta
from
a hub
as
horizons
well beyond
looking for
capital
is
Inc.
Properties,
Atlanta.
planning
to
company is
The
opportunities in Florida, Virginia,
cities
of
the
Southeast
are
markets.
numerous direct flights to other U.S.
Laing
which there
Delta
-
Richmond,
expand
its
presently
and in the
Columbia,
Hexalon, Inc. specializes in
Nashville and Birmingham [59].
select regional malls and office buildings.
Its investments
- Atlanta;
Raleigh/Durham;
are
concentrated in
Nashville
the
East
(4); Lynchburg, VA; Orlando; Boston; New York City
(3); Syracuse; Wayne and Paramus, NJ;
include
some properties
in
Cleveland;
California -
74
Toledo; and
Los Angeles
and
[136]
Antioch.
horizon while his foreign counterpart
Japanese investors
who are
their real estate.
Some
sold any
found that
although the
long-term
representative of
of
to sell
Japanese investors boast that they
Atlanta, we
In
properties.
European investors said
defined
oriented, most
to
were exceptions
There
is typical
culturally disinclined
of their
have never
looks at a 15-20 year
holding period
term
This longer
horizon.
year investment
a 5-10
investor has
real estate
domestic
that the
often said
It is
held.
is commonly
oriented as
as long-term
is not
in Atlanta
foreign investor
The
long-term
this, for
they were
as 10
years.
example Hexalon,
a Dutch mutual fund,
the
defines its holding
period as between 25-30 years.
do not pay noticeably
Foreign investors
for their
real estate.
In
Atlanta, there are very
in
difficult
New York
to judge,
and
few of
have attracted high prices as
the signature properties that
reported
higher prices
Los
we could
Angeles.
not find
Although
any evidence
it
is
that
foreign investors pay higher prices than domestic investors.
few world-class buildings in Atlanta
One of the
Tower.
A
Japanese investor is purported
is the IBM
to be negotiating
to purchase this 1.4 million s.f. building for $320 million,
or $270 s.f.
75
The
foreign investor
For example, Taylor Woodrow Property
than those in the U.S.
Company
internal
Inc.
buys land
funds that
have
been brought
for
major lines of credit with
purposes.
construction
they
that
buildings
According to
built
done
were
a U.S. institution
Gene Nolan, Vice President
of
"out
of
couple
first
the
And,
overseas.
from
in
using
cash,
all
for
of America,
They have no
capitalized
be better
tends to
pocket".
of Taylor Woodrow,
"Frank Taylor (founder) hates debt" [126].
Another
English
Capcount
is
firm
Inc.
America,
According to Derek Aynsley, president of Capcount [110]:
"We use low leverage, on the order of 20% debt,
and will develop out of pocket. When we bring the
occupancy up to a satisfactory level, then we sell
a portion of the property to a joint venture
partner."
The
implication
of
this superior
capitalization
stability that it provides in a down market.
foreign investor should have
is
the
Therefore, the
an improved ability to weather
the cycles inherent in U.S. real estate markets.
In
Atlanta,
the
investor
foreign
resemble his domestic counterpart.
Atlanta
is that,
given enough
has
evolved
One of the lessons from
time, the
foreign investor
will learn to understand the local real estate market.
have shown
the flexibility
to adapt
to
to different
doing business than exist in their own country.
They
ways of
In Atlanta,
are fully integrated into the
many of the foreign investors
76
city.
Most of
them are
with U.S.
staffed
the
types throughout
all product
investing in
community,
and some
personnel
have vertically integrated into ancillary services.
longtime foreign
Noro
are not
counterpart"
says
of
Ashley,
Stan
&
Carter
the market
players in
treated any
Associates,
such as
differently from
"The
says,
Wilma and
their domestic
Sam Ayoub, partner in The Citadel Group
[109].
[132]:
"There is very little difference
domestic investor.
foreign and
between the
foreign
The
He
for diversification.
looking
is
investor
same
the
reads
and
economy
U.S.
the
understands
Wall Street Journal and Atlanta Business Journal
that we do. He can pick up CNN over there and
keep up with what is going on over here."
several stages.
local developer
tend to buy
foreign investor takes
of the
The evolution
place in
Initially foreign investors depend
or advisor to help
upon a
make investments.
existing fully leased buildings
but, will also
enter into joint ventures on local development projects.
investors gain exposure to the
this way, foreign
the local real estate market
In
way we do
them to become familiar with
allowing
business in the U.S.,
They
and to make business contacts.
Eventually, many of them feel comfortable operating on their
own,
at
which
point
start
they
to
handle
their
own
acquisitions and/or developments.
An illustration of this
who
started in
Atlanta
investment manager.
is Noro Realty Advisors, Inc.,
with Branch
&
Associates as
its
The first investments were fully leased
77
existing
office
shopping
centers
another.
developed
started
office
its own
Noro bought
1980,
In
centers
buildings, retail
Branch out
purchases or
Now, it
company.
center and
rehabilitated one
Later, it
multiple tenants.
with
properties
well-leased
were
that
buy
to
proposed
then
Noro
buildings.
and
develops
Noro's
and warehouses.
geographical preference is properties located between Boston
[129].
and Virginia
Maarten Kuik, of Euram Resources reflects [123]:
"It was always our intention to invest in the U.S.
in order to educate ourselves. The learning curve
has taken five years and now we feel comfortable
developing on our own."
a
Being
foreign
international image
the Japanese
Hooker.
can
company
opens doors.
to
advantageous.
For example,
Charlie Graham,
An
look at who
ventures with - Wilma
are doing joint
According
be
Wilma's
& L.J.
president
[119]:
"The international aspect is in vogue and allows
For
us access to an entirely new marketplace.
example, the mystique of being an international
company helped Wilma cut the deal with Mitsui and
Shimizu. This has opened worldwide marketplaces
that other competitors haven't had access, or as
fluid an access, to."
The Japanese
are "knocking at the
door." Overall, the
Japanese are in the process of taking a hard look at Atlanta
but are generally disturbed by the decentralization and lack
of
signature
properties.
Richard Ellis, Inc.
According
[130]:
78
to
Jerry
Sauls
of
"As far as the
Atlanta.
Japanese go,
they don't understand
the
of
Because
number
limited
their list
ranks #7 on
that Atlanta
He estimated
of
will have
in Atlanta, they
world-class buildings
to take more risk than they want to."
of U.S.
cities in which to invest in real estate.
Atlanta is
fastest growing
one of the
expected to be
markets for Japanese real
estate investment, according to a
study
Harris
released
by Louis
Japanese investors
kinds
of real
residential
Associates, Inc.
by Cushman & Wakefield,
study, commissioned
that
&
are
estate including
developments and
also indicated
branch into
planning to
hotels, shopping
recreations areas.
companies interviewed already had
the Japanese
Atlanta, but eight firms
investments in
The
new
centers,
Three of
real estate
expected to invest
in Atlanta in the near future [84].
We fully expect
will become
that in the near
significant investors
future, the Japanese
in Atlanta
real estate.
Their investment will be led by the trading and construction
companies who will attract
because
the Japanese
intermediation
other Japanese capital.
trading companies
services for
prefer to
their Japanese
metro
The Japanese
or planning manufacturing facilities
Atlanta.
These
facilities
will
provide
clients rather
than directly investing for their own account.
are building
This is
offer
all over
a
good
opportunity for Japanese construction companies to establish
themselves in the market.
As the
Japanese presence
79
in the U.S.
market matures,
several
First,
will occur.
things
there
fewer
will be
signature buildings in New York, Los Angeles, and Washington
D.C.
for
available.
There will also be
the secondary markets should
as
the
Japanese
gain
should
they
practices,
diversifying into different
feel
U.S.
product types.
Second,
estate
real
comfort
increased
to overcome the apprehension
should help
available in
look more attractive.
knowledge about
their
follow
the yields that are
Therefore,
predecessors.
Japanese investors,
companies,
estate
real
non
primarily
waves of
as new
these properties
increased competition
in
This transition
about the Atlanta
real estate market.
The Japanese will find
to invest or
will have
willingness
pay is
to
They
Atlanta more competitive.
develop in the suburbs
probably
lower
where their
of
than that
the
existing foreign and domestic developers.
aggregate, currency fluctuations and
In the
the stock
market crash had little impact on foreign investment in real
estate.
Almost all of the
foreign investors that we talked
to explained that exchange rate considerations do not have a
impact
significant
decisions.
This
upon
from earnings and
continue to reinvest.
estate
investment
decided to
keep a
portfolio in dollar denominated
Many foreign investors
are generated
real
they have
was because
certain percentage of their
assets.
their
have plenty of dollars that
sales of assets
that they
They are long-term investors and feel
80
that
currency fluctuations even out.
over the long run,
According to Sam Ayoub,
the Citadel Group
partner in
[132]:
of
"Foreign investors allocate a certain part
commit
Europeans
their portfolio in the U.S.
their
5-15% of
between
portfolio
real
to U.S.
They mostly
estate for diversification reasons.
is paid back;
reinvest the whole equity as it
They really
therefore, exchange rates mean less.
act like Americans."
investment limits on the
percentage of their portfolio that
Currency fluctuations can
could be invested in real estate.
their real
value of
cause the
this threshold.
estate portfolio
to exceed
Richard Ellis' Jerry Sauls reflects [130]:
Dutch were
"The
who had
foreign investors
this was
exception to
One
the only
had a
ones that
real
of the Dutch guilder caused
problem when the fall
the value of their U.S. real estate portfolio to
in the total portfolio
become a higher percentage
than their thresholds allowed. They refused to
send in new guilders until the percentages leveled
out to acceptable levels."
market crash was
The stock
positive
effect
on
noted as having more
of a
estate.
The
investment
stock prices
in
showed that
precipitous
drop in
returns and
values are less volatile.
that
concerned investors
might be the
to
for office
canceled because of
Aynsley
space.
the stock
One
market crash
that would lead
deal that
the stock market crash
According to
real estate
However, the effect
precursor to a weaker economy
less demand
America, Inc..
was that
real
did get
was at Capcount
the company's president, Derek
[110]:
81
"The stock market did kill one deal in the U.S.
that was to be a $100 million retail project in
closing was
The
California.
Beverly Hills,
crash, and
after the
three days
scheduled
officials in England got nervous and decided to
get the $100,000 in earnest money back rather than
sign the deal under such market conditions."
will provide opportunities
Foreign investment
estate brokerage community.
U.S. real
for the
their domestic
Like
counterparts, foreign investors depend on a close network of
advisors
opportunities.
investors.
investors
run across
We did
were marketing
their
a few
the market
in the
overseas.
cases where
foreign
to investors
-
something
Foreign fund advisors in
in
property off
taking the
buildings will
However, office
States.
be leased
foreign
property
countries, effectively
have to
and
of
presence
increasing
their home
still
markets
new
up the necessary organization to take
ever
the
of
attention
Members of the brokerage community should be
aware of this and set
advantage
their
to
bring
to
that cannot
be done
the States will need to
know of new opportunities and new markets.
it will take time and
In many cases,
the
confidence
and
language barriers
are important to
payoff in the end.
in Atlanta
trust
of the
patience to gain
foreign
investor,
and
overcome.
Relationships
foreign investors, and such
an effort may
may have
to be
Interestingly, we did not find any cases
where foreign
investors were using
brokerage firm to handle their transactions.
82
an in-house
Foreign
coupled
by
offered
opportunities
with relatively
stability
of the
U.S.
significant impact
real
economy,
unique
investments,
estate
and the
safety and
will continue
to attract
high returns,
have
should
capital
Foreign
investors.
foreign
U.S.
The
stay.
to
here
is
investment
upon the structure and
a
operation of the
U.S. real estate market in the future.
As for Atlanta, each day, more and more deals are being
done with foreign
things to
come.
The
world is turning
the city have some
estate deals in
foreign involvement.
contributions,
global real
into a
be surprised if most of the
estate market, and we would not
future real
a glimpse of
We view this as
investors.
Be it through debt
contracting,
construction
element of
financing, equity
management,
or
development, the foreign investor will be present, and those
in
the real
better
estate
prepared for
industry who
the many
arise.
83
recognize
this will
new opportunities
be
that will
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San
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112. Beacham, Erin
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113. Branch III, J. Alexander and Broome, Stephen D. Partner
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Associates, Atlanta office, private interview on June
28,
1988.
114. Bryant, Tarby Managing Partner, Braemar Group, Ltd.,
Atlanta office, private interview on June 23, 1988.
115. Carter,
III,
Frank,
and
Neilson,
Jr.,
R.
Perry
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office, private interview on June 20, 1988.
C. L. Senior Vice President, Gerald D.
116. Davidson III,
interview on
Hines Interests, Atlanta office, private
June 30, 1988.
Senior Vice President, Laing
117. Gillespie, James A.
Properties, Inc., Atlanta office, private interview on
June 27,
1988.
Inc.,
118. Glover, John T. President, Post Properties,
Atlanta office, private interview on June 29, 1988.
119. Graham, Charles President, Wilma, Inc., Atlanta office,
private interview on June 21, 1988.
Carter &
Director of Research,
120. Hitzemann, Jerry
Associates, Atlanta office, private interview on June
27,
1988.
121. Hoek, Martin J. Vice President-Investments, Hexalon
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1988.
122. Kelly, Lawrence P. Partner, Pope & Land Enterprises,
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Inc.,
1988.
123. Kuik, Maarten Euram
Resources, Atlanta office, private
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92
124. Lockwood, J. Charles Executive Vice President, Mark
Atlanta office, private interview on June
III, Inc.,
27,
1988.
125. McCosh, John Staff Writer, Atlanta Business Chronicle,
Atlanta office, private interview on June 24, 1988.
126. Nolan, Eugene
F. Vice President,
Property Company of America, Inc.,
private interview on June 27, 1988.
Taylor
Atlanta
Woodrow
office,
Zay, Kathy. Audit Managers,
127. Ogawa, Mitsuji M. and
Ernst & Whinney, Atlanta office, private interview on
June 23,
1988.
Cecil M. President, The Phillips Company,
128. Phillips,
Atlanta office, private interview on June 24, 1988.
129. Raffety, Michael R. President, Noro Realty Advisors,
Inc.,
Atlanta office, private interview on June 28,
1988.
130. Sauls, W. Jerry Director, Richard Ellis, Inc.,
office, private interview on June 22, 1988.
Atlanta
131. Simpson, A. Boyd President, L. J. Hooker Developments,
Atlanta office, private interview on June 29, 1988.
132. Stowers, Fred, and Ayoub, Sam
Group, Atlanta office, private
Partners, The
Citadel
interview on June 28,
1988.
President, Dutch Institutional
133. Vonhof, Herman A.
Holding
Company,
Inc.,
Atlanta
office,
private
interview on July 1, 1988.
Stewart
Director,
134. Wight,
Consultants, Atlanta office,
1,
Real
Estate
Landauer
private interview on July
1988.
Annual Reports
135. Capital & Counties, plc - 1987.
136. Hexalon Real Estate, Inc.
-
1987.
137. Laing Properties, Inc. and Subsidiaries 138. Laing Properties, plc -
1987.
139. Taylor Woodrow, plc - 1987.
93
1987.