Monday, July 21, 2008

Foreign Capital Magnet - The New Politics

Always a cheerleader for America, Rudy Giuliani's latest endeavor may even help reinvigorate American commercial real estate markets. His Giuliani Partners business, which up until this point has focused on security and management consulting, will venture into commercial real estate investing backed largely by foreign capital raised through Rudy's extensive network of relationships. It seems like this could be a win-win-win for all involved as much of the U.S. real estate market is in need of eager capital, Giuliani's investors stand to make excellent returns over the long haul, and Giuliani earns another star in his cap for any future political runs (an attempt at the New York governor's office is rumored).

My one concern is that a fund headed by a former New York City mayor will have a strong bias towards investing in NYC - the one market in which foreign capital needs little convincing to invest, as evidenced by the Chrysler Building stake recently purchased by Abu Dhabi. A real boost to the U.S. commercial real estate market would come if the Dubai's and Qatar's of the world started investing their petro-dollars in secondary and tertiary markets. Places like Houston, Charlotte, and Seattle still have healthy economies and never saw the overbuilding experienced by Phoenix, Miami, or Vegas. However a lack of capital is slowing real estate investment nationwide, taking the good down with the bad.

Additionally, a contrarian case could be made for investing in the most beat-up markets while they're down. Any patient capital that can be strategically invested in battered markets like Phoenix or Detroit stands to reap huge benefits as those markets gradually recover (or IF they recover in the case of Detroit).

Maybe other out-of-office politicians will follow Giuliani's lead and use their clout to encourage foreign money to jump into secondary U.S. cities. Imagine what Clinton Capital Partners could do for Little Rock...

Llenrock Group

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