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Foreign Investors Eyeing San Mateo

(Posted from The Daily Journal)
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With the Bay Area’s economic boom resonating across the globe, a foreign investment firm picked up a newly constructed San Mateo apartment complex for $73.6 million this week.

Mode Apartments, an 111-unit multifamily complex on 2 acres at 2089 Pacific Blvd., was sold by developer Wood Partners LLC to Land and Houses USA Inc., a small subsidiary of the Thailand-based, publicly traded Land and Houses Public Company Limited.

The new site comprised of two three-story buildings housing a mix of one-, two- and three-bedroom units and boasting a fitness room, resident lounge, clubroom, fire pits and more, was completed late last year.
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The luxury apartments rent for an increasingly standard steep range between $2,800 a month for a less than 800-square-foot one-bedroom unit and almost $5,000 per month for 1,500-square-foot three-bedroom unit.

The purchase sets the average apartment value at around $663,000 per unit and, according to San Mateo’s Finance Director Dave Culver, the sale will extend $368,000 in one-time property transfer taxes to the city.
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While offshore investments are nothing new, interest is trending and there has been a shift in purchasing methods, said Phil Saglimbeni, first vice president of investments at Institutional Property Advisors, who brokered the sale.

“We are seeing an uptick, but it’s a very specific type of asset these foreign investors are looking for. They like class A assets,” Saglimbeni said. “The brand-new stuff like Mode is not very complicated. They buy it, hire a management company and put it on the shelf. Their motivations are multifold — a lot of it has to do with hedging or risk diversification out of their home country. And it also has to do with the Bay Area and how explosive the economy has been. Whether it’s foreign or domestic, people just want to be in this market.”
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Until a few years ago, it was more common for foreign investors to create a joint venture with a U.S.-based firm to acquire properties and the public wouldn’t typically know of the offshore involvement, Saglimbeni said. However, foreign companies are increasingly starting to directly source real estate deals on their own, Saglimbeni said.
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Mode was the second deal Saglimbeni said he’s conducted with Land and Houses and he’s also in the middle of a transaction for a Redwood City property with a Singapore-based group.

Wood Partners’ completion of Mode is the second luxury apartment community it’s finished in the Bay Area having sold an Oakland development for $103.2 million in 2013, according to a Wood Partners press release.

The San Mateo apartments sit on the site of a former commercial printing facility and are close to Caltrain as well as major employers such as Oracle, Visa, Gilead and Franklin Templeton Investments, according to Wood Partners.
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The area is proving to be popular for large-scale sales. A few blocks north, the site of the proposed 599-unit mixed-use residential Station Park Green project next to the Hayward Park Caltrain Station sold to Essex Property and Trust for $67 million Tuesday. Last month, DivcoWest spent more than $130 million to buy the fully-leased 210,000 square-foot office complex at 700-900 Concar Drive that’s home to Salesforce and four other tenants.

With job growth booming, rental prices skyrocketing and inventory selling at a premium, Saglimbeni said companies around the world are looking to buy in.

“Whether it’s commercial or residential, we are over the last three, four, five years seeing more interest from offshore capital than we had historically,” Saglimbeni said. “[Demand] for well-located U.S. real estate has been on the rise.”
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What Real Estate Trends to Expect in 2015

(Story Reposted from USNews)
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Many millennials have held off on buying a home, but experts expect that to change in 2015.

As housing recovers, prices in many markets across the U.S. have shot up. In fact, RealtyTrac reported that the median sale price of U.S. single-family homes and condos in October had reached its highest level since September 2008. Price appreciation and the lure of foreclosures created a feeding frenzy for real estate investors willing to pay cash and made it harder for traditional buyers to compete.
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But experts say that 2015 will be marked by a return to normalcy and balance for real estate markets across the country. Stan Humphries, chief economist for Zillow.com, predicts that home value growth will slow to around 3 percent per year instead of the 6 percent seen recently, and that will make real estate less attractive to many investors. “It’s been a tough market for buyers,” he says. “I think it’s going to get easier in 2015. Negotiating power will move back to buyers and away from sellers. It will be a much more balanced market.” (Too many buyers and too little inventory, or the opposite, contribute to an unbalanced market.)
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Redfin.com’s chief economist Nela Richardson agrees. “It’s been a clear pattern that the investor activity has been shrinking over time,” she says. “Investors like to go in where they can buy low and sell high. Price growth is starting to slow dramatically, so they can’t sell much higher than what they buy. Investment property is less compelling in 2014 going into 2015.”

More inventory and less competition from investors means even traditional buyers are becoming “more picky, and they’re willing to let a home go if they don’t think it’s a good fit for them,” Richardson adds. “Buyers are less worried that they’ll miss out on something. Houses are more like buses now. If you miss one, another one will come along.” Whereas buyers might waive contingencies in the recent past to make their offer more attractive to sellers, they’re now more likely to insist on contingencies for financing and inspections.
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That said, foreign investors may still find high-end American real estate appealing because of economic turbulence in their home countries. For instance, the U.K. is toying with a so-called “mansion tax” that would apply to those who own properties worth more than 2 million British pounds (or over $3 million), and China has placed restrictions on homebuying in large cities. Some foreign investors also worry about currency fluctuations devaluing money they hold in their home countries. “That section of the market is still all cash – people buying up these huge places because it’s safer here than in their own countries,” says Herman Chan, real estate broker with Bay Sotheby’s International Realty in San Francisco.

Buyers from outside the U.S. may use their properties as a rental, a pied-à-terre (a secondary residence used for travel) or a residence for children studying at American colleges. But for buyers looking for more moderately priced homes, 2015 could offer a respite from bidding wars and all-cash offers. “People who’ve been on the fence about selling are finally going to pull the trigger, which is great for buyers [because it creates more inventory],” Chan says. “Now people with regular jobs and 20 percent down finally have a chance to get into the market.”

For years, many millennials have postponed homeownership in favor of renting, but that may also change next year as a growing number of Gen Yers start families and seek more stability. “By the end of 2015, millennial buyers will represent the largest group of homebuyers, taking over from Generation X,” Humphries says. “They prefer smaller units closer to the urban core, so it will be interesting to see whether they follow the time-honored path towards the periphery of the metro.”
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Baby boomers are also likely to make a move in 2015. Chan says he’s “gotten so many calls from baby boomers recently saying, ‘We’re downsizing, and we’re moving to be closer to our grandkids or our son or daughter.'” With fewer homes underwater, they’re finally in a position to sell.
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While mortgage rates may not remain at the historic lows seen recently, more people may qualify for home loans as issues like foreclosures or short sales age out of their credit reports and Freddy Mac and Fannie Mae ease mortgage eligibility. Freddy and Fannie recently announced a new mortgage program for buyers with a down payment as low as 3 percent. “Freddy and Fannie have always been the industry leaders, and they’re saying, ‘It’s OK to lend to people who don’t have 5 percent down. It’s OK to extend credit in a reasonable and safe manner,” Richardson says.